Jeong Eun-bo "Will Play a Role if Excessive Expansion of Loan-Deposit Interest Rate Spread Occurs" (Comprehensive)

Card Company Fee Recalculation Work... "Currently Under Negotiation"

On the 7th, Jeong Eun-bo, Governor of the Financial Supervisory Service, held a meeting with the CEOs of major credit finance companies at the Kensington Hotel in Yeouido, Seoul. (From left) Yoon Kyu-sun, CEO of Hana Capital; Mok Jin-won, CEO of Hyundai Capital; Lee Dong-chul, CEO of KB Kookmin Card; Kim Joo-hyun, Chairman of the Credit Finance Association; Jeong Eun-bo, Governor of the Financial Supervisory Service; Lim Young-jin, CEO of Shinhan Card; Jung Tae-young, CEO of Hyundai Card; Kim Dae-hwan, CEO of Samsung Card; Choo Kwang-sik, CEO of Lotte Capital.

[Asia Economy Reporter Jin-ho Kim] Jung Eun-bo, Governor of the Financial Supervisory Service (FSS), stated on the 7th that he will closely monitor the interest rate spread between deposits and loans of financial companies and intervene if it is excessively widened without reasonable grounds.

Governor Jung made these remarks to reporters after concluding the 'CEO Meeting of Specialized Credit Finance Companies' held at the Kensington Hotel in Yeouido, Seoul, on the same day.

Governor Jung said, "We are monitoring the interest rate spread related to financial loan products," adding, "An excessively wide spread is undesirable from the consumer's perspective." He further stated, "We will examine whether the interest rate spread has widened excessively compared to the past and assess whether the results are reasonable, fulfilling the supervisory authority's role."

Until now, financial authorities have emphasized a 'non-intervention' principle regarding the widening of the interest rate spread. However, Governor Jung publicly expressed his intention to review its validity and intervene if necessary. This is interpreted as a response to growing public criticism that while loan interest rates are soaring, deposit interest rates are rising slowly, seemingly only benefiting financial companies.

Regarding the postponement of the disciplinary review on Hana Bank related to the private equity fund incident, he drew a line by saying, "It is a matter for the disciplinary committee to decide." On the recalculation of card company merchant fees, he responded, "Discussions are ongoing with the National Assembly, centered on the Financial Services Commission."

Earlier at the meeting, Governor Jung emphasized the need for risk management, stating, "Card and capital companies have structural weaknesses that make them more sensitive during crises compared to other financial sectors."

Referring to the so-called 'card crisis' in 2003, Governor Jung urged proactive risk management by card and capital companies. Since these companies lack deposit-taking functions, they have a high proportion of low-credit and multiple debtors, making them structurally more vulnerable during crises than other financial sectors.

He said, "The card industry has experienced the painful lesson of the card crisis, which produced numerous defaulters," adding, "The capital industry also underwent harsh restructuring after failing liquidity management during the 1997 foreign exchange crisis." He emphasized, "Learning from past experiences, we must proactively strengthen risk management to prepare for domestic and international uncertainties such as major interest rate hikes and the spread of COVID-19 variants."

Regarding the supervision and inspection direction of specialized credit finance companies, he said, "We will strive for harmony and balance between proactive and reactive supervision based on laws and principles."

He also pledged active support to strengthen the competitiveness of specialized credit finance companies. Governor Jung stated, "We will broadly allow ancillary businesses and expedite reviews so that companies can diversify revenue sources using big data and non-face-to-face platforms," emphasizing, "We will actively support everything from expanding the designation of innovative financial services to overseas expansion."

The meeting was attended by Governor Jung, Kim Joo-hyun, Chairman of the Credit Finance Association, and CEOs of major specialized credit finance companies including Shinhan Card, Samsung Card, KB Kookmin Card, Hyundai Card, Hyundai Capital, Hana Capital, and Lotte Capital.