Research Staff

Research Staff

Park, Chang Gyun Senior Research Fellow, Head of Office of Research Coordination


Seoul National University (B.S.)
London School of Economics and Political Science (M.Sc.(econ))
Cornell University (Ph.D.)


A Necessary Overhaul of Korea’s Debt Collection Market and Policy Challenges / Sep. 15, 2020
Korea announced a plan to legislate the Consumer Credit Act with an aim to help individual borrowers to quickly recover bad debts and return to normal economic activities, and to regulate harsh debt collection practices. The proposed law is expected to effectively fill the regulatory gap in the area where market failure is highly likely. However, there’re also warnings about a possibility that an excessive government intervention in the debt collection market could undermine Korea’s credit culture. A desirable regulatory framework on the debt collection market should be designed to minimize social costs arising from excessive debt collection, but not to rein in debt collection too harshly to cause moral hazard among debtors. Although there will be numerous talks during the legislative process, two issues in particular need in-depth discussions. First, it’s necessary to allow the proposed debt relief negotiator to step in before overdue for offering credit counseling such as financial education and advice on personal finance. Second, a more desirable regulatory principle than a mandate-only approach should be market discipline that encourages players to do better for their reputation risk. Towards that end, it’s advisable to bolster accountability of original creditors, and to allow outsourced debt collectors to enter the debt buyer market.
Korea’s Financial Support Package to Small Merchants and Self-employed Under Covid-19 / Apr. 09, 2020
As financial market unease continues and the real economy contracts seriously, Korea’s policy authorities have been stepping up their efforts to better cope with the Covid-19 pandemic. In particular, Korea unveiled a KRW 58.3 trillion financial support package with an aim to give support to small merchants and the self-employed that are bearing the biggest brunt of Covid-19. However, the package has two potential issues. First, it could possibly lead to excessive debt of the borrowers under the package. Second, the time lag of the loan provision process could make it harder for the borrowers to meet their imminent need for cash. To cope with those issues, supplementary actions are desired. What’s worth considering is to create an incentive for those implementing the package to become proactive to distribute funds. This could be done only under clear policy principles where the funds are distributed and managed under a separate account and any loss from that account is borne by fiscal support unless the loss arises from any intention or malfeasance. Also necessary is a detailed adjustment in policy. To prevent the funds provided by the package from adding a further repayment burden to the borrowers, it’s necessary to allow them to repay the debt through installments for over five years or so at the current low interest rate. On top of that, a policy tool to ease the borrower’s repayment burden may be needed to tackle potential side effects where the current package targeting already debt-ridden small merchants and the self-employed could just defer today’s economic hardships into the future. More concretely, it’s worth mulling over offering fiscal support to help the borrowers to pay rents or wages if they keep their workers employed despite a sales decline.
Korea’s DIF Should Invest Overseas / Nov. 19, 2019
The Deposit Insurance Fund (DIF) is a fund that accumulates premiums received from insured financial institutions at normal times and uses them to help the insured repay customers’ deposits when the insured lose their repayment ability at times of distress. Under the current regulatory framework, the DIF reserve can be managed via a limited range of vehicles such as government and public bonds, government-guaranteed bonds, monetary stabilization bonds, bank bonds, public fund investment pools, and bank deposits. At the end of June 2019, the reserve amounted to KRW 11.31 trillion, of which 58.3% is held in bank deposits, 40.6% in bonds, and 1.1% in public fund investment pools, with the 2.45% return on investment. For the DIF to immediately respond to any bank run in a deposit-taking institution, the management principle should admittedly prioritize stability and liquidity ahead of others. The DIF’s current asset portfolio composition seems to reflect that. However, further effort is needed to improve investment returns to the extent that it doesn’t hinder such a principle. Also notable is the unique significance underlying in the DIF’s stability. In general, stability can be viewed as achievable by minimizing the potential loss of the principal, for example, by purchasing low-risk government bonds or bank deposits. However, in a situation that requires the DIF to step in, in other words, when a bank’s repayment ability is seriously undermined, there’s actually no chance at all for the principal of bank deposits to remain intact. Also worth considering is the high probability that distress at one bank could spread to the whole banking system. Under such circumstances, it’s impossible for the principal of the DIF’s bank deposits to remain intact. Hence, it’s advisable to replace a substantial part of DIF bank deposits with other assets whose principal is likely to be protected even when the whole banking system’s repayment ability is seriously undermined. US and German government bonds with high liquidity and low credit risk could be an alternative. This would be possible either by a reform on the Depositor Protection Act, or by the Financial Services Commission recognizing high-grade foreign government bonds as investment assets. Since 2008, Hong Kong has included US Treasury securities in investment assets, via which the deposit insurance fund has been managed.
Impact Investment and Facility-Based Social Services / Jun. 19, 2019
Concerns on the quality of social services by private providers have been continuously increased, especially in the areas of childcare, long-term care for the elderly, and public housing. The difficulty, however, is hard to avoid when profit-oriented private providers take part in the social services market under government price controls. Much of service quality concerns could be alleviated by inducing social enterprises seeking social as well as economic returns to enter the market. But it will be a daunting challenge for social enterprises with weak funding capacity to enter the market for social services such as childcare, long-term care, and public housing, because the market entry requires acquisition of large amount of fixed assets such as facilities. One possible solution is to establish impact investment funds that provide capital into impact areas including social enterprises by inviting investors with various kinds of appetite for risk and return combinations. Social enterprise would play a pivotal role in building a firm foundation for provision of high quality facilitybased social services. Tax benefits for individual investors would be very useful to facilitate impact investment. To further stimulate capital flows into impact areas, a donation to impact areas by a corporation should be allowed to be counted as expenses in calculating the tax base for corporate income tax.

Seminar Presentation