[2026 Parliamentary Audit] "Someone Could Go to Prison," "Kim Yongbeom Must Appear": Leverage ETF Blame Dispute (Comprehensive)

Lee Eog-weon Bows at Political Affairs Committee Audit
On Questions About a Presidential Office Directive, Says "We Heard Various Opinions"
People Power Party Again Calls for Kim Yong-beom to Be Named as a Witness

"This is a matter for which someone could go to prison."

"Tens of trillions of won in the nation's assets were effectively plundered. It was the worst policy failure."

At a parliamentary audit, lawmakers traded accusations over single-stock leveraged products, which have been identified as a major factor behind increased volatility in the domestic stock market. The opposition, which has alleged that the presidential office intervened, again called for former presidential policy chief Kim Yong-beom and others to be named as witnesses. It also urged Financial Services Commission (FSC) Chairman Lee Eog-weon to acknowledge the policy failure and apologize to the public. The ruling party, meanwhile, pointed to problems in the policy's design and implementation but dismissed the allegations of presidential office intervention as somewhat conspiratorial.

Lee Eog-weon, chairman of the Financial Services Commission, answers questions from lawmakers during a parliamentary audit of the Financial Services Commission and other agencies held by the National Assembly's Political Affairs Committee on the 8th. Yonhap News

Lee Eog-weon: "We assessed the risks... Claim of 52 trillion won in losses is inaccurate"

Appearing at the National Assembly's Political Affairs Committee audit of the FSC and other agencies on October 8, Lee responded to lawmakers' questions about whether the single-stock leveraged products had been introduced at the presidential office's direction, saying, "That is not the case. We heard various opinions." He said, "The basis for their introduction was an amendment to an enforcement decree, which falls under the FSC's jurisdiction. For some time, people have continued to argue that there was a need to introduce them, asking why investors could invest in them overseas but not in Korea."

Debate over the launch of single-stock leveraged exchange-traded funds (ETFs) began as soon as the audit started. The government had allowed the listing of so-called "Samsung Electronics-SK hynix leveraged" products to address asymmetric regulations that allowed investment overseas but not in Korea. However, it faced criticism for effectively turning the domestic stock market into a betting ground. After the products, which track twice the daily change in the underlying stock, were launched, market volatility surged and large losses among individual investors became evident.

In response to opposition lawmakers' calls for an apology to the public, Lee stood up and bowed his head, saying, "We introduced the products after considering various factors, including the need for the policy. As a result, however, the situation has caused concern among the public, and as head of the financial authorities, I sincerely apologize for that."

Asked whether he would take responsibility as FSC chairman if any illegal acts were found in the process of introducing the single-stock leveraged ETFs, he replied, "Of course, I should take responsibility if there was any illegality." When criticized for not conducting stress tests before their introduction, he avoided a direct answer, saying, "It depends on how you define the term 'stress test,'" but countered that officials had assessed "investor risks and the impact on the market" when introducing the products.

According to Park Sung-hoon of the People Power Party, listing reviews take an average of 62 days, while the review of single-stock leveraged ETFs took an average of 29 days. In response, Lee explained, "Index ETFs have a simple structure, so the time required to list them differs from that for other products. I understand that various analyses have been conducted on single-stock leveraged ETFs, including claims that their rebalancing effect is not significant."

Lee also disputed a report by an overseas investment bank that estimated individual investors had lost about 54 trillion won through single-stock leveraged ETFs, saying, "The institution that published the report said it was not an official report but an unofficial market commentary issued by its trading department, and the actual contents are also inaccurate."

Regarding the scale of individual investors' losses estimated by the financial authorities, he said, "Some analyses put the figure at 2.3 trillion to 2.4 trillion won, and there are aspects that need to be examined." According to materials that the Financial Supervisory Service submitted to the office of Choi Eun-seok of the People Power Party, the authorities calculated that individual investors had realized total trading losses of 2.3242 trillion won across 10 comprehensive financial investment business operators between May 27, when single-stock leveraged and inverse products were launched this year, and August 14.

However, Choi said the figures reflected only realized losses from sales and therefore underestimated the actual damage. He said, "If you include all the indirect losses, tens of trillions of won in assets held by individual investors and institutions in Korea have vanished into thin air. Tens of trillions of won in the nation's assets were effectively plundered."

Responding to criticism over whether he would introduce the products again if given the chance, Lee said, "The foreign exchange market was in a very difficult position at the time. There was talk that the exchange rate would break through 1,500 won, and some media outlets even raised the possibility of a third foreign exchange crisis." When further criticism followed that the FSC had no analysis of the products' impact on the foreign exchange market and that their launch was rushed, raising questions about possible political motives, Lee replied, "I will keep in mind that we should have examined the matter more carefully, beyond just the need for the policy."

Former Blue House policy chief Kim Yongbeom, who resigned (Yonhap News Agency)

Opposition: "Everyone points to Kim Yong-beom; he must be called as a witness"

Throughout the audit, Lee consistently answered questions about who had made the decision to introduce the single-stock leveraged ETFs by saying, "They were introduced through an amendment to an FSC enforcement decree." However, opposition lawmakers continued to allege that the presidential office had intervened and call for former policy chief Kim Yong-beom to be named as a witness.

Cho Jung-hoon of the People Power Party, who had called on Lee to apologize to the public, said, "I appreciate the courage it took to apologize. I recognize that courage, but I find myself wondering whether the FSC chairman is really the person who should be standing here." Seo Il-jun of the People Power Party said, "President Lee Jae-myung said, 'Someone must have made the decision.' The question is whether this happened because the FSC chairman made a bad policy decision or whether someone else was involved. Seeing the chairman bear this heavy burden alone makes me feel sorry for him."

Park Sung-hoon of the People Power Party said, "The public suffered losses of 54 trillion won because single-stock leveraged ETFs were rushed onto the market a week before the local elections," and asked, "There are allegations that the presidential office was involved in launching a high-risk financial product. Why, then, is former policy chief Kim not being called as a witness?"

He said that, contrary to the government's explanation, claims had repeatedly emerged that financial institutions attending a closed-door meeting hosted by the presidential office in January had not proposed introducing the products. He argued that Kim and others should be called as witnesses at the audit so that the details of the policy-making process could be established.

Shin Dong-wook of the People Power Party also said, "Everyone points to former policy chief Kim Yong-beom," adding, "Why doesn't he come here to the audit and explain clearly why he did it?" Park Jun-tae of the People Power Party also cited these circumstances, saying, "I have provisionally concluded that President Lee Jae-myung and the presidential office were the main culprits behind the single-stock leveraged ETFs, while the Korea Financial Investment Association and the FSC were accomplices." He argued, "Whether through a parliamentary investigation, a criminal investigation or a special prosecutor's investigation, this is a matter for which someone could go to prison." The opposition is also calling for Hwang Seong-yeop, chairman of the Korea Financial Investment Association, to be named as a witness, in addition to former policy chief Kim.

Ruling party counters: "Claims of presidential office involvement are conspiratorial"

The ruling Democratic Party of Korea, while pointing to problems surrounding the single-stock leveraged ETFs, including failures in market oversight, countered that there had been aspects of the system's introduction that were unnecessary.

Park Hong-bae of the Democratic Party said, "The opposition is taking a somewhat conspiratorial approach by claiming that the presidential office unilaterally pushed for the products to be introduced," and asked, "Single-stock leveraged ETFs based on Korean stocks had been available in the United States for a long time and in Hong Kong for a year, and domestic investors were trading them. Wasn't that why they had to be introduced?" Jeon Hyun-hee of the Democratic Party also supported the move, saying, "The opposition's criticism misses the point. Their introduction was unavoidable at the time."

Kim Hyun-jung of the Democratic Party said, "The fundamental cause of this problem is not the approval of the product launch, but the failure of the Korea Exchange to oversee forces using high-frequency algorithmic trading strategies, or HFT, and to fulfill its responsibility to monitor them." According to Kim, average monthly HFT trading volume was about 2,700 trillion won from January to May, but rose 52% to 4,200 trillion won from June to August, after the single-stock leveraged ETFs were listed. She argued that a full investigation of trades linked to ETF rebalancing was needed, as was consideration of separating the exchange's market surveillance function into an independent body.

In response, Lee said, "The exchange continuously monitors areas where there may be unfair trading," adding, "We will conduct stricter reviews so that we can respond immediately if illegal activity is detected." He also said the authorities would review various options, including overseas examples, regarding changes to the exchange's governance structure.

The ruling party also disputed the opposition's calculation of investor losses. Park Hong-bae said, "The prices of the underlying assets, SK hynix and Samsung Electronics, fell, and the products were leveraged, so I think it would be reasonable to put the losses at about half that amount." He also dismissed opposition lawmakers' claims that the exchange-rate benefit cited by the government as a reason for introducing the products did not materialize at all. Lee Kang-il of the Democratic Party said, "The exchange rate turned downward after leveraged ETFs were introduced. It is a coincidence that the exchange rate began to fall from the mid-1,500-won range at around the same time. It may be a stretch to say the products had an effect, but it is also impossible to say they had no effect."

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