Presidential Office: "Excessive Bank Profits, Interest Business from Loan-Deposit Rate Spread"

Yoon Criticizes High Bank Interest Rates in Major Budget Review
Presidential Office to Promote Institutional Measures to Ease Interest Burden
Also Discussing Plans to Strengthen Social Responsibility

[Asia Economy Reporter Ki-min Lee] On the 13th, the Presidential Office pointed out the high-interest bank loan situation as "easy interest profiteering using the interest rate spread in the banking sector's excessive profits amid difficult economic conditions."

The Presidential Office's Economic Secretary's Office stated in a press reference material titled 'Recent Status and Policy Directions on Bank Sector Profits' that "the net income of domestic banks increased by about 2 trillion won to 18.9 trillion won compared to 16.9 trillion won last year."

The Economic Secretary's Office explained that this increase in bank profits was due to an increase in corporate loans and an expansion of the interest rate spread. Corporate loans increased by 104.6 trillion won compared to the previous year in the relaxed financial environment after COVID-19, and the interest rate spread also expanded by 31 basis points to 2.55 percentage points from January to December of last year.

The Economic Secretary's Office introduced that financial authorities have strengthened efforts to reduce the interest rate spread and enhance loss absorption capacity amid structurally increasing interest income during the rate hike period, responding through ▲ implementation of interest rate spread comparative disclosure to promote competition in the banking sector ▲ improvement of the additional interest rate calculation system for reasonable interest rate determination ▲ enhancement of expected loss forecasting models to expand loan loss provisions.

Additionally, "the banking sector has consistently utilized about 6-7% of net income for social contributions such as low-income finance, community, and public interest projects," and "institutional measures to alleviate consumer interest burdens and strengthen loss absorption capacity will be steadily implemented, additional policy measures will be continuously reviewed, and plans to further expand support programs for vulnerable groups and profit social return to strengthen the banking sector's social responsibility will be continuously discussed with the banking sector."

President Yoon, at the chief secretary meeting presided over by the president on the morning of the same day, said, "The public suffers greatly due to high bank interest rates," and instructed, "Since banks have a public nature, profits should be considered to return as so-called win-win financial benefits to the struggling people, self-employed, and small business owners."

President Yoon also said, "It is appropriate to use the funds to build up provisions robustly in preparation for future financial market instability," and requested that the public not feel alienated due to the 'bank money feast.'"