[1mm Financial Talk] "Our Financial Group Supporting Vulnerable Groups, Applauded by the Financial Services Commission"

Supplementing Shortcomings with the New Start Fund
"It Reflects the Social Responsibility of Banks," Praised
Other Financial Companies to Announce Soon in Turn

[Asia Economy Reporters Sim Nayoung, Song Seungseop] "They scratched the itch exactly where it itched. Woori Financial Group really worked hard." For the first time in a while, applause is being heard for Woori Financial Group. A senior official from the Financial Services Commission evaluated the support measures for vulnerable groups announced by Woori Financial Group within a month as "fully embodying the social responsibility of banks."

The Financial Services Commission introduced a support plan worth 30 trillion won at the government level, including debt forgiveness for small business owners who have been delinquent on loan repayments for more than 90 days, but thought that this alone was insufficient to restore the economic damage to vulnerable groups caused by COVID-19. This was also the reason why Chairman Kim Ju-hyun of the Financial Services Commission urged at a briefing on the New Start Fund system, "Financial companies themselves should also take an interest in supporting borrowers who are struggling."

The Financial Services Commission devised a two-track strategy. In addition to policies funded by the government budget, they requested financial companies to independently come up with measures to rescue borrowers at risk of default. The first to respond was Woori Financial Group. The core of the first announcement last month was to reduce the principal of loans for low-credit borrowers who have been faithfully repaying their debts.

Among multiple debtors with a credit rating of 7 or lower who make regular repayments, if the interest rate exceeds 6% when extending a loan, the principal will be reduced by the amount of interest exceeding 6%. The Financial Services Commission explained, "The Credit Recovery Committee, a financial public enterprise, also allows faithful payers to receive loans at an interest rate in the 4% range," adding, "The financial group introduced a support system with a similar purpose."

In the second announcement on the 17th, an unprecedented support plan was announced to inject 23 trillion won into vulnerable groups over three years. Of this, 1.7 trillion won will be used for principal reduction for low-credit faithful payers and preferential interest rates for vulnerable borrowers, and 17.2 trillion won will be poured into supporting young small business owners, including loan support for youth housing stability and funds to stabilize small business owners. 3.5 trillion won will be allocated to expanding policy financial products such as the New Hope Loan and Sunshine Loan.

The first principle of Woori Financial's project was "effectiveness." This was because there had been many criticisms that the support policies banks rolled out one after another during the COVID-19 phase were merely "showcase" measures with little real effect. A Woori Financial Group official explained, "We considered ways to maximize the effect in connection with government livelihood policies to stabilize the lives of vulnerable groups hit by the all-around bombshells of COVID-19 damage, high inflation, and high interest rates."

Considering that just two months ago, trust inside and outside Woori Bank collapsed due to an embezzlement incident involving 70 billion won by one employee, the financial sector views Woori Financial's first move this time as an opportunity for image renewal. A financial sector official said, "Although there are evaluations that innovation is relatively slow compared to other financial holding companies and that work processes and organizational culture are somewhat lagging, this announcement showed responsibility as a bank that received a large amount of public funds."

Other financial companies, including Hana Financial Group, also plan to soon announce support measures for vulnerable groups developed at each company level. Whether banks can shed the image of "taking away umbrellas when it rains" through this opportunity is a matter of interest in the financial industry.