Opposition Blames Government for Stock Market Crash... "Financial Authorities Must Not Be Rubber Stamps for the Presidential Office"

Political Affairs Committee Holds Plenary Session

Questions Raised to Financial Services Commission, Financial Supervisory Service, and Korea Deposit Insurance Corporation

Following "Black Tuesday," when the KOSPI index plummeted by 10% in a single day, the index fell below the 6,000 mark during intraday trading for two consecutive days. In response, the National Assembly's Political Affairs Committee urged the government to come up with countermeasures. The opposition party raised the issue of government-leveraged exchange-traded funds (ETFs), arguing that they are exacerbating stock market volatility and demanding accountability. The ruling party also addressed the problem and called for additional measures.

On the morning of July 29, the Political Affairs Committee held a full session at the National Assembly in Yeouido, Seoul, conducting a current affairs inquiry and hearing work reports from the Financial Services Commission, Financial Supervisory Service, Korea Deposit Insurance Corporation, and others. In particular, the issue of recently intensified market volatility, including the rapid declines in KOSPI and KOSDAQ, was put in the spotlight.

A full meeting of the Political Affairs Committee is being held at the National Assembly on the 28th. Photo by Hyunmin Kim

Lee Eogwon, Chairman of the Financial Services Commission, stated in a business report on the same day that for single-stock leveraged ETFs, “The plan to strengthen the cash deposit requirement to 30 million won will be implemented earlier than scheduled, starting on the 31st, along with improvements to the minimum trading unit.” He added, “Measures to enhance the management responsibility of securities firms and asset managers, as well as ways to better inform and pre-educate investors for their protection, will be implemented in August.”

Choi Eunseok, a lawmaker from the People Power Party and member of the Political Affairs Committee, said, “At this point, Chief Policy Officer Kim Yongbeom, who pushed for leveraged ETFs, should be dismissed immediately, and President Lee Jaemyung should apologize to the public for the policy failures. Financial authorities must not become mere rubber stamps for the presidential office’s policy team.”

Kim Jaeseop, another lawmaker from the People Power Party, commented on social media on the same day, “President Lee has been running the government like a finance YouTuber, turning the public into victims of his massive stock tip channel. All President Lee has left behind is the simultaneous destruction of both stocks and real estate.”

Previously, the Democratic Party’s “Korea Premium K-Capital Market Special Committee” also warned about the risks of single-stock leveraged ETFs. Representative Oh Ki-hyung, chair of the committee, stated after a meeting on July 27, “Concerns have been raised that the term ETF is not appropriate, given the high-risk derivative characteristics of these products. If legal amendments are required, we are prepared to pursue them together.”

Meanwhile, on July 28, Chief Policy Officer Kim Yongbeom of the presidential office identified the narrowing competitive gap between South Korea and China in the semiconductor industry and growing skepticism about global semiconductor demand related to artificial intelligence (AI) as factors behind the stock market collapse. In response to criticism that leveraged ETFs are increasing market volatility, Kim explained that “This is due to structural factors of Korea’s capital market, namely high numbers of retail investors, widespread use of derivatives, and the heavy concentration in just two companies (Samsung Electronics and SK hynix).” He added, “The Financial Services Commission will comprehensively review these contributing factors.”

This content was produced with the assistance of AI translation services.