In order to carry forward financial innovation next year, it is crucial to induce market funds into innovative industries, instead of the oversupplied housing mortgage sector, according to the top financial regulator Monday.

“The funds (in the domestic capital market) are excessively focused on household lending, which mostly comprise housing mortgage loans,” said Financial Services Commission Chairman Eun Sung-soo at a financial policy meeting held at the Korea Deposit Insurance Corp.

“Our priority is to change this direction of fund supplies, not just for the sake of the financial industry but also for innovative growth of the economy in general.” 

The FSC has set its goal to increase the liquidity volume for corporates, especially small and medium-sized enterprises with competitive technologies and growth potential, according to the policymaker.

Its push to divert liquidity away from the bubble-prone real estate sector to SMEs comes in line with the government’s latest announcement of a comprehensive set of powerful regulations to stabilize the housing market.

The so-called Dec. 16 measures included an all-out ban on mortgage loans for apartments priced 1.5 billion won ($1.29 million) or more and a tightened loan-to-value ratio for those priced 900 million won or more.

In the following week, the government unveiled its economic policy operating blueprint for next year, vowing to add speed to innovation and investment, determined to edge its way out of prolonged slow growth.

Envisioning 100 trillion won worth of new investment projects in 2020, the Ministry of Economy and Finance forecast that Asia’s fourth-largest economy will achieve 2.4 percent growth next year, while its inflation will vault over its current zero percent range and recover to around 1 percent.

“As the government’s economic policy team underlined last week, this is a crucial time to make all possible efforts for a breakthrough, and for this, the financial sector is required to play an active role,” Eun said.

The FSC chief pledged to completely upgrade the infrastructure and incentive systems to encourage financial firms to abide by the government’s guidelines.

For instance, by revising the loan-deposit ratio in January, authorities will offer incentives for corporate lending, encouraging lenders to alter their business model.

The FSC is also currently working on reshuffling the credit evaluation system by introducing an evaluation model for intangible assets such as technologies.

By Bae Hyun-jung (tellme@heraldcorp.com)