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South Korean official: Debt adjustment, bankruptcy are 'rights' to help debtors recover
🇰🇷 South Korea /Economy & Trade

South Korean official: Debt adjustment, bankruptcy are 'rights' to help debtors recover

From Dong-A Ilbo · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Official statement Context piece
  • A South Korean official views debt adjustment and bankruptcy not as penalties, but as rights for debtors to recover.
  • The official argues that South Korea's financial system, post-1997 crisis, is too creditor-centric.
  • The policy aims to help debtors get back on their feet by managing and reducing long-term overdue debts, addressing concerns about moral hazard.

Kwon Dae-young, the Vice Chairman of South Korea's Financial Services Commission (FSC), stated that debt adjustment and bankruptcy should be viewed as legitimate rights for debtors seeking to overcome financial difficulties, rather than punitive measures. He believes these processes are essential for enabling individuals to restart their lives.

In developed countries, debt adjustment or bankruptcy is not seen as a punishment, but as a legitimate right to escape difficulties.

— Kwon Dae-youngExplaining his view on debt adjustment and bankruptcy.

Speaking on a presidential online policy program, Kwon addressed criticisms that debt relief programs are populist or represent "crony capitalism." He countered these views, asserting that South Korea's financial system has been overly focused on creditors since the 1997 Asian financial crisis. He emphasized that financial institutions should share responsibility when borrowers face problems.

Our financial system has become creditor-centric since the 1997 IMF foreign exchange crisis.

— Kwon Dae-youngDescribing the historical focus of South Korea's financial system.

The FSC aims to prevent financial institutions from neglecting long-term debts and engaging in persistent collection efforts. Instead, the policy encourages financial firms to manage and reduce these debts through their own adjustment and reduction processes, thereby supporting the recovery of debtors.

Financial institutions must share the responsibility when problems arise for debtors.

— Kwon Dae-youngStating the need for shared responsibility in the financial system.

Addressing concerns about moral hazard, the risk that individuals might exploit these systems, Kwon questioned the practicality of such behavior. He argued that individuals with the means to repay debts would likely not choose to live as credit defaulters, given the severe restrictions on accessing credit cards, bank accounts, and even mobile phone services, as well as the impact on employment opportunities. He stressed the importance of supporting those genuinely in need.

How many people would realistically hide their money and live as a credit defaulter?

— Kwon Dae-youngAddressing concerns about moral hazard.
DistantNews Editorial

Originally published by Dong-A Ilbo in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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