Why is the government wiping out long-term debtors' debt? The FSC chief explains

Financial Services Commission Chairman Lee Eok-won said Thursday that forgiving the debts of long-term delinquent borrowers is "not a matter of charity or benevolence — it is what allows those people to return to economic life, become consumers and taxpayers, and keep society functioning."

Lee made the remarks on the YouTube program "Kim Eou-joon's Humility Is Hard News Factory," responding to criticism that debt relief creates moral hazard. "Society can only sustain itself if we build a system that lets people start fresh after a certain period," he said. "Pooling our collective strength to resolve these cases and move forward is the path to a virtuous cycle."

He said inclusive finance means "expanding the scope of finance and having it take on more," adding that the current system leaves many people behind because credit and collateral requirements concentrate lending among high-credit, asset-rich borrowers.

He then asked, "Should we keep chasing down small, long-overdue debts indefinitely, or is it better to clear them once and let people return to normal economic life?" He added: "Every society faces the question of how people who have failed can get back on their feet and how those situations are handled."

Lee said President Lee Jae Myung had stressed that the approach should be institutionalized and made permanent rather than carried out as a one-off measure, and outlined plans for managing delinquent debt. "Problems that could be resolved early become unmanageable if they drag on," he said. "This is not about forgiving debts where repayment capacity exists — it is about making a comprehensive assessment of that capacity."

Lee identified "debtor protection" and "capital market normalization and advancement" as the two core themes of Wednesday's ministry briefing.

"For the capital market to function well, it needs to separate the wheat from the chaff," he said. "Insolvent companies must be weeded out, innovative ones brought in, and Kosdaq needs structural reform to address low price-to-book ratios and duplicate listings — making it more solid and resilient."

On recent volatility in domestic markets, Lee said swings in the global semiconductor sector had grown wide, with hopes and fears crossing every day. "Not just our semiconductor stocks but global ones are all lurching," he said, noting that Samsung Electronics and SK Hynix now account for 52 to 53 percent of the domestic market cap, amplifying the impact of any shock.

On criticism that single-stock leveraged ETFs are amplifying volatility, Lee said it was "a responsibility I must bear as the ultimate steward of financial markets," and acknowledged their influence is significant, saying the extent of that influence was "a matter of degree." He added that the FSC, the Ministry of Economy and Finance and other relevant agencies were meeting to discuss the issue, and that a remedial plan would be announced promptly after close monitoring.

Lee also said a real estate forum held Wednesday had exposed a sharp divide: one side argued for easing loan restrictions and opening them up to genuine end-users, while the other warned that loosening credit in an already unstable property market would be dangerous.