The financial authorities are accelerating efforts to expand productive finance supply. They are focusing on implementing an immunity system that allows financial institutions to take risks in providing funds, as well as plans to publicly disclose supply performance, solidifying productive finance as a key policy initiative.
According to the financial authorities on September 15, the Financial Services Commission (FSC) is considering expanding the scope of immunity for productive finance to include self-employed individuals in the service sector. Immunity is a system that exempts financial company employees from liability for losses incurred after loans or investments are made in accordance with normal procedures, provided there is no intent or gross negligence. This aims to increase funding in areas where financial institutions tend to be conservative due to risk concerns.
An FSC official stated, "We are listening carefully to the difficulties financial institutions face and their opinions regarding immunity. Based on this, we will develop institutional improvements that align with the purpose of productive finance."
In line with this initiative, financial institutions are establishing dedicated teams or restructuring existing ones to strengthen internal management systems, reflecting relevant performance indicators in their key performance metrics (KPIs).
As a result of this trend, the scale of productive finance supply is also increasing. Since the implementation of the productive finance policy in the fourth quarter of last year, the financial sector has supplied a total of 272.3 trillion won by the end of July this year. There are plans to push for a total of 1,560 trillion won over the next five years.
Efforts to disclose productive finance performance are also underway. The FSC plans to publish a fact book containing the results of productive finance initiatives starting in the fourth quarter of this year, while financial institutions are expected to release their own white papers around December and annual reports detailing their performance by May next year. Once the supply performance and progress of each financial institution, along with best practices, are made public, it will serve as a de facto 'report card' for comparing productive finance achievements among institutions.
There are expectations that the combination of performance evaluation, immunity, and performance disclosure will enhance participation in productive finance among financial institutions. In particular, it is anticipated that financial institutions will be more proactive in supplying funds to innovative companies and startups that have struggled to secure financing under traditional assessment methods due to insufficient collateral or financial performance.
However, some express concerns that focusing solely on expanding supply performance could lead to neglect of soundness management. As competition intensifies among financial institutions for productive finance results, there is a risk that they may increase supply without adequately assessing risks. If the funds provided under such circumstances become non-performing due to future industry downturns, the burden will fall back on the financial institutions. Conversely, there is also a possibility that funding may disproportionately flow to low-risk, high-quality companies.
Previously, FSC Vice Chairman Kwon Dae-young urged, "Please establish a system to self-verify whether the results of productive finance are inflated to avoid misunderstandings."
A financial sector official noted, "Once the scope and requirements for immunity in productive finance are clarified, it is expected that an environment will be created where financial institutions can more actively consider loans and investments in innovative companies and startups. However, given the current trend of revitalizing lending to self-employed individuals and small businesses, soundness management measures must also be developed in light of worsening business conditions and increasing closures."
* This article has been translated by AI.
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