Four days ago, at the "Real Estate Grand Debate" presided over by President Lee Jae-myung, Kim Young-do, a senior research fellow at the Korea Institute of Finance, proposed imposing an additional surcharge on high-priced, large-scale mortgage loans. It was a rehash of a proposal from a debate hosted by the Financial Services Commission (FSC) about a week earlier, but its weight was different. This time, it was presented before the president.
Though given the grandiose name of a macroprudential management charge, the idea is a mortgage-version "wealth tax." No further explanation is needed. The core of it is that owners of expensive apartments should pay at least 10 million won more per 1 billion won borrowed, on top of loan interest.
Consider this. Even if an individual borrows 3 billion won, that amounts to just "0.0000025%" of total household debt. By this logic, large corporations that receive loans of trillions to tens of trillions of won in the market could shake the South Korean economy, so their borrowing should be blocked altogether. The Korea Institute of Finance cited Article 119, Paragraph 2 of the Constitution, which mentions regulation and coordination of the economy, as grounds for government intervention. But the freedom and creativity of individuals and enterprises (Article 119, Paragraph 1) should come first.
The fact that such a half-baked plan, weak in both logic and grounds, was raised in the presence of the president reflects the authorities' lack of philosophy. Even considering the public nature of finance, regulation must have its feet planted in the market. Under the new administration, this basic premise is growing blurry. Since when did the FSC have to bring forward a plan for which it admits, "Since this is an issue I raised, there has been no academic discussion (on the scale and appropriateness of the charge)"?
Looking back, even the "200 million, 400 million, 600 million won" mortgage caps by price choke off loans for all citizens, regardless of income or repayment ability. There is also no time limit. The result of pouring out only financial regulations while turning a blind eye to supply, such as reconstruction and redevelopment, has been the collapse of the housing ladder and the anger of the 2030 generation. Loans should be simple and intuitive. With patchwork regulations emerging each time the effect wears off, even bank employees do not understand what is going on.
The same goes for killing off jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) loans. Making every concession for ordinary people, it is right to increase jeonse loans for villas and row houses. Piling regulation upon regulation only damages the market further and infringes on citizens' freedom.
In fact, the market's principles and framework have been broken more than once or twice. Earlier, President Lee introduced the novel concept (?) of "high-credit borrowers equal high interest rates." Under the new administration's cruel financial frame, debt restructuring has become a matter of course as a right. The logic is that advanced countries also protect delinquent debtors and support their recovery, but nowhere else does the government forgive large-scale debt every five years as in Korea. Banks lend with other people's money, the money of depositors. For those who truly lack the means to repay their debts, it is right for financial firms to expand preemptive debt restructuring on their own. But unless it is an exceptional case, money lent by financial firms must be collected to the end. That is the principle of finance.
The idea of limiting financial group chairmen to three terms is another example. It may suit the taste of the presidential office, but it disregards holding company boards and shareholders. Jamie Dimon, CEO of JPMorgan Chase, has led the group for 21 years since 2005. A CEO's term is decided by the market and shareholders, not a matter for the government to dictate. The introduction of a chief inclusive finance officer is likewise a show-oriented, expedient administration. A survey into the banking sector's social contribution programs even raises doubts about the identity of the supervisory authorities.
As the authorities have become buried in technical matters such as loan provisions, amounts, and financial firms' governance structures, South Korea has become a nation without a financial vision. There is talk of mega-projects worth 1,500 trillion won in semiconductors, artificial intelligence (AI) data centers, and physical AI, but no concrete long-term financing plans or measures to support them are in sight.
Domestic banks have grown on the field plowed by the government after the foreign exchange crisis. There is a desperate need for more fundamental discussion and alternatives on how to reshape and grow the current landscape so that South Korea can gain competitiveness in the global race for advanced industries, as well as on mega-banks to support ultra-large industries. Restoring the collapsed ecosystem of finance for ordinary people, the alliances and realignments of regional finance, and the restructuring of insurers are all possible only under the government's big picture.
On-chain finance, digital assets, and agentic AI are now reality. There is a need to rebuild, from the ground up, financial policy that is now nearly 30 years old since the foreign exchange crisis. Last week, the Japanese government unveiled a "new financial strategy" that includes easing regulations on banks' equity investments and the exercise of voting rights. South Korea must change too. As things stand, there is no future for South Korean finance.
