Kim Yong-beom urges South Korea to fundamentally redesign the credit loan system

Blue House Policy Chief Kim Yong-beom said that South Korea’s credit-loan system has structural flaws that push vulnerable borrowers outside the system, and urged the financial sector and authorities to carry out a fundamental redesign.

According to news from inside and outside the presidential office and from financial circles (3 sources), Chief Kim continuously posted three articles on Facebook from the 1st to the 3rd, titled “Financial Structure Series,” launching a strong criticism of the current credit-assessment and lending system. The starting point of his questions came from a prompt by President Lee Jae-myung: “Why do the most well-off people receive the lowest interest rates, while the most desperate have to pay the highest interest?” Chief Kim explained that at first he thought the question deviated from basic principles of finance, but after thinking it through repeatedly, he came to view it as a question that makes people re-examine why the financial system exists in the first place.

He pointed out in particular that although credit ratings are nothing more than the compression of an individual’s complex life into a single number, in actual financial practice they operate almost like an absolute standard. Since the 2008 financial crisis, this trend has only been further reinforced: rather than accommodating high-risk borrowers, financial institutions tend to raise the thresholds even more. Chief Kim’s diagnosis was that in this process, low-credit borrowers not only have to shoulder high interest rates, but also completely lose the opportunity to access finance within the system circle; meanwhile, borrowers in the middle credit tier are also excluded due to management costs being too high. He characterized this as not an outcome that just happened to emerge in South Korea’s financial sector, but a structural contradiction that has in effect been tolerated under a cost-and-efficiency logic.

As for solutions, Chief Kim distinguished the roles of different financial players and put forward demands. He urged commercial banks to break away from loan practices centered on high-credit customers, and shift to a lending structure that encompasses borrowers in the middle credit tier. He specifically noted that internet banks should not remain at selective business that only chases screening based on past delinquency records or credit-card usage history—so-called “cherry-picking.” For laypeople-oriented financial institutions, he said it is necessary to adjust existing operating models and consider introducing new types of institutions. He also criticized financial authorities, saying they should not hide behind the pretext of soundness management, which has helped expand financial blind spots.

Chief Kim also acknowledged at the same time that he himself is a person involved in designing and operating this system, and cannot fully escape responsibility. When mentioning his experiences as former vice chairman of the Financial Services Commission and as the first vice minister of planning and finance in the Ministry of Planning and Finance, he described himself as a “co-conspirator” of this system—an expression that, rather than being mere rhetorical flourish, is a self-reflection by a policy designer. This has also been interpreted as a signal that the new government will set policy evaluation criteria not only based on financial stability, but also on inclusiveness and accessibility.

The market is watching closely whether the issues Chief Kim raised will directly lead to institutional reform. Because credit loans involve interwoven areas such as a bank’s soundness, household debt management, and support for laypeople’s finance, it is not easy to adjust both the scale of change and the speed. However, given that the core staff in the presidential office have already openly targeted the credit-loan structure itself, future discussions on expanding loans to low- and middle-credit borrowers, improving credit-assessment methods, and restructuring the laypeople-oriented financial supply system may unfold comprehensively. This trend could become an opportunity for future financial policy to shift from pure risk management toward improving financial accessibility.