Liability Exemptions Granted to Financial Firms Joining 150 Trillion Won National Growth Fund: “Removing Obstacles to Investment”

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According to Financial News, the financial authorities have decided to grant special exemptions from liability to financial institutions that participate in the 150 trillion won National Growth Fund. If there is no intent or gross negligence, they will not impose sanctions on related investment and lending activities, in a move designed to encourage private capital to flow into advanced industries.
The Financial Services Commission (FSC) announced on the 10th that it had convened the Exemption Review Committee on the 6th and approved a plan to apply these special liability exemptions.
The National Growth Fund is a comprehensive financial support program aimed at scaling up advanced strategic industries and venture innovation companies. It will total 150 trillion won over the next five years, consisting of 75 trillion won from the Advanced Strategic Industries Fund backed by government-guaranteed bonds and 75 trillion won in private capital from financial institutions and pension funds.
The government took into account that, given the large capital requirements and long investment horizons of advanced strategic industries, private financial institutions may be reluctant to invest. Accordingly, based on the Regulation on the Inspection and Sanctions of Financial Institutions, it designated work related to the National Growth Fund as subject to exemption from liability.
The scope of the special exemption covers equity investments, indirect investments, infrastructure project financing, and low-interest loans carried out by financial institutions in conjunction with the Advanced Strategic Industries Fund.
First, when financial institutions co-invest in equity in projects in which the National Growth Fund makes direct equity investments, those activities will be exempt from liability. For example, if an advanced strategic industry company A conducts a 300 billion won rights issue and commercial banks or securities firms acquire new shares alongside the National Growth Fund, that transaction would fall under the exemption.
In addition, when the National Growth Fund invests indirectly through private asset managers, the liability exemption will also apply to financial institutions that participate in the fund as limited partners (LPs). The exemption will likewise cover cases where they join infrastructure projects in senior or subordinated tranches, or where private banks participate as lenders in syndicated loans for low-interest financing.
The FSC expects this measure to ease the burden of ex post sanctions stemming from unforeseeable losses and to spur financial institutions to engage more actively in productive finance. An FSC official stated, “In addition to this exemption decision, we plan to pursue further regulatory improvements, including rationalizing risk-weight (RW) rules for investments made through funds.”
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elikim@fnnews.com Kim Mi-hee Reporter