[Reporter’s Notebook] Blaming Others Again... Ruling Party Shifts Responsibility for Election Defeat to Banks

Ruling Party Shifts Blame for Election Defeat to Banks
Lawmakers Criticize Financial Sector Over Loan Policies and Interest Rates
Banking Industry Caught Between Political Pressure and Market Demands

[Asia Economy Reporter Park Sun-mi] The banking sector, which had been lying flat under the ruling party's relentless management interference, now faces the burden of taking responsibility for the ruling party's crushing defeat in the April 7 by-elections.

At the financial forum "Coexistence and Unification Forum" held on the 21st, lawmakers from the Democratic Party of Korea refused to acknowledge that their defeat in the election was due to failures in housing policy, unresolved unfairness, and disappointment with reforms. Instead, they shifted the blame onto the financial sector by citing the Bank of Korea's lack of role and loan regulations imposed on banks.

Yoon Ho-jung, the Emergency Response Committee Chairman and floor leader, criticized, "The role of finance is as important as the government in overcoming the COVID-19 economic crisis, but the Bank of Korea's role was insufficient." Lawmaker Noh Woong-rae added, "The base interest rate is 0.5%, but bank loan interest rates are around 3-4%. The financial sector, which earns tens of trillions of won annually, should lower interest rates by about 1 percentage point for small business owners."

The strongest assertion of financial sector responsibility came from Yoon Hu-deok, Chairman of the National Assembly's Planning and Finance Committee. He said, "It seems the public judged the Democratic Party because loans were not available." The ruling party, which treated banks like their own treasury and engaged in political finance, is now blaming the election defeat on the fact that money was not properly circulated in the market or that loans were not readily available, causing public sentiment to turn against them.

Banks, which have been instructed by the government and financial authorities to strengthen loan management due to the excessive increase in household debt, can only be baffled. To tighten loans, they must reduce preferential interest rates or strengthen screening processes. The very claim that interest rates should have been lowered now is nonsensical.

The banking sector is already deeply intimidated by the crossfire of political interference and market intervention. Following the demands from "higher-ups," they drastically reduced dividend payout ratios and took losses by extending loan maturities and deferring interest payments. Banks must also contribute 100 billion won annually to support financial services for low-income households. "Gwanpia" and "Jeongpia" (bureaucrats and politicians entrenched in financial public enterprises, associations, and key private financial positions) continuously occupy influential posts and exert pressure.

One must know the facts to speak with authority. If the ruling party wanted to at least save face, they should have understood the exact reasons for their election defeat and the basic financial common sense that interest rates cannot be arbitrarily set according to political demands.