Refer Report

The legal capital of Korea Development Bank, which has been tied up at 30 trillion won for 10 years, is expected to double to 60 trillion won. The capacity to support new growth industries such as semiconductors and batteries is also expected to increase accordingly.

According to the financial sector on the 12th, Representative Yoon Han-hong (People Power Party) proposed an amendment to the Korea Development Bank Act with these contents the day before. Rep. Yoon is the chairman of the National Assembly’s Political Affairs Committee, which is in charge of the Korea Development Bank.

The amendment contains provisions to expand KDB’s legal capital to 60 trillion won. The statutory capital is the maximum capital of KDB, and the actual capital is determined by capital increase by the government, the largest shareholder.

KDB’s legal capital was 400 million won when it was launched in 1953, and increased to 1 trillion won in 1981. Afterwards, it grew to 5 trillion won in 1995, 10 trillion won in 1998, 20 trillion won in 2009, and 30 trillion won in 2014. However, it has been tied up at 30 trillion won for 10 years since 2014.

As the Korean economy and industry developed and KDB’s policy finance function grew, KDB’s capital also increased. As of the end of August, the capital was 26.31 trillion won, with 87.7% of the legal capital exhausted. If the statutory capital was not increased, the Korea Development Bank would not be able to properly perform its core function of supporting industrial development.

Rep. Yoon explained that KDB’s statutory capital needs to be increased as various demand for policy financing is arising from the activation of local payments, new orders from the defense industry and nuclear power plants, and new national growth industries such as semiconductors, batteries, and biotechnology.

In particular, KDB is in desperate need of capital increase as it is in charge of a low-interest loan program worth 17 trillion won, which is the core of the government’s semiconductor support policy announced in May. The government plans to increase capital by 2 trillion won to KDB within next year, and KDB plans to secure loan resources through this. In order to receive a capital increase of 2 trillion won, the legal capital must be increased.

Rep. Yoon also suggested that the soundness of KEPCO could be shaken if KEPCO runs into a deficit due to KEPCO’s shares held by KDB as a reason to increase the statutory capital. As KEPCO’s losses were reflected in its financial statements, KDB’s Bank for International Settlements (BIS) capital ratio fell to 13.4% at the end of last year. This is below 15%, which is considered the minimum response to a crisis. As of the end of June, it was only 14.25%.

Reporter Kang Hyeon-woo hkang@hankyung.com

Source: Korean