Former FSS Chief Warns Loan Easing Risks Housing Price Surge
Lee Bok-hyun argues that long-term credit restrictions may be unconstitutional, while urging tighter controls on leveraged ETFs.
Key points
- Lee Bok-hyun warns that long-term loan restrictions may be unconstitutional while acknowledging their short-term necessity.
- He calls for strict buffer devices like weight limits to manage risks in 2x leveraged ETFs for tech giants.
- The former FSS chief predicts the Kospi could reach 5,000-6,000 due to AI semiconductor cycle investments.
Lee Bok-hyun, former head of the Financial Supervisory Service, warned that easing loan regulations could cause real estate prices to explode. He argued that blocking leverage in the long term carries a high likelihood of being unconstitutional. This view challenges the current government's high-intensity credit controls aimed at stabilizing the housing market.
The former official emphasized that while short-term price suppression is understandable, permanent restrictions face legal hurdles. He noted that household debt exceeding 100% of GDP poses a systemic risk if combined with high interest rates. Lee stressed that loan regulations must be firm reins held by any government to prevent financial collapse.
Leveraged ETFs require strict buffer devices
Lee expressed concern over the rapid adoption of 2x leveraged ETFs for Samsung Electronics and SK Hynix. He warned that excessive concentration in these products allows speculative funds to dominate market dynamics. The former chief stated that such high-risk instruments need portfolio weight limits and sales volume regulations.
He criticized the indiscriminate opening of gates to risky financial products in recent years. Provocative advertisements in everyday spaces have fueled short-term speculative sentiments among individual investors. Lee argued that structured products are necessary for capital market development but must be managed carefully.
Ad-hoc real estate measures have clear limits
The former FSS head acknowledged the necessity of tightening household loans to control the property market. He cited the 2022 Legoland crisis as a warning of how credit crunches can destabilize the funding market. However, he drew a clear line against unsustainable ad-hoc regulatory measures.
Lee criticized the expansion of land transaction permission systems as a limited solution. He argued that real estate cannot be effectively controlled without activating the private rental market. This perspective suggests that structural reforms are more vital than temporary credit restrictions.
Capital market revival drives Kospi growth
Lee evaluated the Value-up program positively, noting its continuation of advanced capital market policies. He believes the Kospi has the potential to reach the 5,000 to 6,000 range. This growth is attributed to policies prepared in anticipation of the AI semiconductor cycle.
The former official emphasized the importance of revitalizing the capital market beyond partisan logic. He credited the combination of previous and current government efforts for improving short-selling systems. According to chosun.com, these combined efforts are now bearing fruit in the stock market.
