Democratic Party Restarts 'KDB Capital Increase'... Accelerating 'AI 100 Trillion Fund' Pledge?

[Financial News] Discussions to increase the legal capital limit of the Korea Development Bank have resumed within the ruling Democratic Party. There have been ongoing concerns both inside and outside the industry that the Korea Development Bank's 30 trillion won capital limit is over 90% exhausted, hindering its primary function as a policy financial institution. Since the launch of the Lee Jae-myung government, voices within the ruling party have been calling for a resolution to this issue. Particularly, as the Korea Development Bank is expected to handle the practical investment of President Lee's key pledge, the '100 trillion AI fund', there is interest in whether this will accelerate the bank's capital expansion.
According to the political circle on the 17th, Democratic Party's Park Sang-hyuk proposed an amendment to the Korea Development Bank Act on the 16th. The core of the proposal is to increase the legal capital, currently set at 30 trillion won, by 15 trillion won to 45 trillion won. Park, who proposed the bill, also serves as the Democratic Party's chief spokesperson and deputy chief of floor communication.
The legal capital of the Korea Development Bank has been steadily increased from 1 trillion won in 1981, 5 trillion won in 1995, 10 trillion won in 1998, 20 trillion won in 2009, to 30 trillion won in 2014. However, there has been no change in the capital level for about 10 years since 2014. Consequently, both the Democratic Party and the People Power Party have previously voiced the need to increase the legal capital, but discussions had stalled recently.
With the launch of the Lee Jae-myung government, the first proposal to expand the legal capital has been submitted within the ruling party. Park Sang-hyuk told Financial News, "There has been a continuous discussion on the need to expand the legal capital of the Korea Development Bank."
Park stated, "As of the end of June this year, the paid-in capital of the Korea Development Bank stands at 27 trillion 400 billion won, with a capital exhaustion rate of 90.12%," explaining that "this is virtually close to the legal limit, leaving little room for capital expansion." He pointed out the increasing need for large-scale financial support for the development of core technologies related to advanced strategic industries such as AI and semiconductors, nurturing related companies, and building infrastructure.
The political and financial circles view this move as a measure to accelerate the creation of the 100 trillion AI fund, a key pledge of President Lee. The government is pursuing a plan to create a 50 trillion won advanced strategic industry fund led by the Korea Development Bank to strengthen the competitiveness of future new businesses such as AI, semiconductors, robots, and secondary batteries. The main funding will be raised through the issuance of government-guaranteed advanced strategic industry fund bonds, but some costs are planned to be covered by the Korea Development Bank's own resources, necessitating an upward adjustment of the legal capital.
Currently, the Korea Development Bank has established a task force (TF) to create a 50 trillion won advanced strategic industry fund, with plans to expand it into a vice-president-level organization in the future. Consequently, it is reported that the position of vice-president within the Korea Development Bank will increase by one.
Park stated, "By increasing the legal capital of the Korea Development Bank to 45 trillion won, we aim to promptly respond to policy financial demands, supply and manage the necessary funds for the development and nurturing of industries, expansion of social infrastructure, regional development, financial market stability, and other sustainable growth promotion, thereby promoting the sound development of the financial industry and the national economy."

cjk@fnnews.com Choi Jong-geun Reporter