Lee Bok-hyun Meets Bank CEOs, Urges Preparedness for Potential Household Debt Deterioration

[Image source=Yonhap News]

[Asia Economy Reporter Bu Aeri] On the 18th, Lee Bok-hyun, Governor of the Financial Supervisory Service, urged commercial banks to "proactively prepare for the possibility of household insolvency expansion due to high interest rates."

On the same day, Governor Lee met with major commercial banks at the Bankers' Hall in Jung-gu, Seoul, and said, "To ensure a soft landing of household debt, please establish credit screening based on repayment ability, and actively work on improving the loan structure, such as expanding installment loans and reducing the proportion of variable interest rate loans."

He added, "For borrowers at risk of insolvency, please operate the credit recovery support system effectively through proactive debt counseling and assistance to prevent insolvency."

Regarding the right to request interest rate reductions, he said, "Please actively improve work processes so that the acceptance of interest rate reductions can be made transparently based on more objective and reasonable criteria."

Governor Lee also expressed concern about the high interest burden on small and medium-sized enterprises (SMEs) and requested active support from the banking sector. He urged, "Please actively prepare and operate various interest support programs tailored to the situations of companies experiencing temporary liquidity difficulties to prevent them from becoming insolvent due to high interest burdens."

Regarding recent financial accidents in the banking sector, such as breach of trust and embezzlement, Governor Lee stated, "These are major factors that undermine customer trust in banks," and called for strengthening internal controls. He emphasized, "Although the Financial Supervisory Service and the banking sector jointly prepared and are implementing internal control innovation plans last year, the will and role of bank presidents are most important for their operation." He also requested strengthening internal controls in the IT sector.

Governor Lee also requested cooperation from the banking sector to stabilize the capital market. He explained, "The domestic capital market is generally considered stable, but concerns and polarization persist as investment demand is still concentrated mainly on high-quality bonds."

He continued, "Banks are the largest economic agents with the greatest capacity to supply funds and have a good understanding of the financial and non-financial conditions of fund demanders such as companies, so please play an active role to prevent system risk caused by capital market tightening from materializing."