6th National Assembly hearing on the Ministry of Finance and Economy scrutinized the accountability in the introduction of single-stock leveraged exchange-traded funds (ETFs) and the appropriateness of public asset sales. Questions were raised about whether sufficient warnings regarding investment risks were considered and whether past investment losses were adequately explained while presenting public asset sales as achievements.
During the session, Lee Hyung-il, Deputy Prime Minister and Minister of Finance and Economy, expressed regret over the losses incurred by leveraged ETF investors. Earlier, Rep. Kang Min-guk of the ruling People Power Party questioned the process of introducing leveraged ETFs, stating, "There were several opportunities to prevent a disaster worth 54 trillion won," and pressed for details on the Deputy Prime Minister's involvement.
Rep. Kang pointed out that a report commissioned by the Financial Supervisory Service from the Capital Market Research Institute advised caution regarding domestic introduction, and that discussions at the Financial Services Commission meetings raised concerns about the potential for increased maximum losses and investor protection. He also inquired about who proposed the introduction of leveraged ETFs during a Blue House meeting in January and what role the Deputy Prime Minister played.
The controversy stems from the launch of single-stock leveraged products, including those linked to Samsung Electronics and SK Hynix, in late May. The government aimed to address regulatory discrepancies that limited domestic trading of products available overseas. However, following the launch, investor demand surged faster than expected, and volatility in the semiconductor sector raised concerns about investor protection and market stability.
In July, financial authorities implemented supplementary measures, temporarily halting new listings and advertising while increasing the minimum deposit requirement to 30 million won. Despite these actions, debates over accountability continued, leading the opposition to file complaints against relevant parties with the Corruption Investigation Office for High-ranking Officials last month.
The Deputy Prime Minister stated that the introduction of individual financial products was led by the Financial Services Commission and that he understood the products were introduced to promote capital market development and address regulatory discrepancies.
Regarding investor losses, he remarked, "I feel regret that we were unable to adequately address the significant losses incurred by individual investors in advance."
On the topic of public asset sales, there were calls to evaluate the actual outcomes of the 'asset efficiency' initiative pursued by previous administrations. Critics argued that the sales proceeds were presented as achievements without adequately disclosing past investment losses.
The government established an asset efficiency plan in 2022, aiming to streamline 794 cases of non-core real estate and equity holdings across 177 institutions, with a goal of achieving approximately 14.5 trillion won in asset efficiency by 2027. The initiative was intended to focus on the core functions of institutions and utilize recovered funds to improve financial soundness.
During the questioning, examples were cited, including the sale of Korea Electric Power Corporation's investment in a green growth fund, the Korea Racing Authority's sale of land near Seocho Station, and Korea Gas Corporation's relinquishment of rights to the Akkas gas field in Iraq.
Rep. Kim Nam-jun of the Democratic Party pointed out that Korea Electric Power Corporation reported a loss of 3.7 billion won from its investment in the green growth fund, selling its stake for 500 million won, while the Korea Racing Authority sold the Seocho Station site for 35.9 billion won less than its initial valuation. He also criticized Korea Gas Corporation for counting the amount recovered from relinquishing its rights after incurring significant past investment losses as part of its sales performance.
* This article has been translated by AI.
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