The Democratic Party of Korea is pushing a bill that would allow the National Pension Service (NPS) to temporarily suspend asset trading during sharp swings in financial markets, amid growing concerns that mechanical rebalancing could pressure domestic stocks with selling.
Rep. Park Sun-won of the Democratic Party said Thursday that he had proposed the National Pension Act amendment containing these measures as its lead sponsor.
Under current law, the Minister of Health and Welfare establishes the National Pension fund management plan and sets target allocations for each asset class through review by the Fund Management Committee and the Cabinet, followed by presidential approval. However, as domestic stocks have recently surged, concerns have grown that the NPS could mechanically sell domestic equities to meet its target allocations, raising fears of a resulting market shock.
The amendment would allow the Fund Management Committee, following its review, to adjust target allocations and permissible ranges for each asset class and to temporarily suspend asset trading aimed at meeting target allocations when financial or foreign exchange markets swing sharply. The measure would apply only within a scope that does not undermine the fund's long-term stability and profitability, and the details of related measures would have to be reported to the relevant standing committee of the National Assembly.
"This is intended to reduce concerns about market shocks from mechanical rebalancing and to protect both the National Pension's long-term returns and the stability of retirement funds," Park said.
