Lee Bok-hyun: "Bank Operations Are 'Predatory'... 10 Trillion Support Is Beyond the Essence"

"Bank Performance, Considerations for Medium- to Long-Term Measurement"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Hyun-ji] Lee Bok-hyun, Governor of the Financial Supervisory Service, criticized banks for engaging in predatory practices in a monopolistic environment. He also stated that the 10 trillion won scale support plan has deviated from its essence and called for more effective support measures.

On the 17th, after a seminar on diagnosing the entry of big tech into the financial industry and future tasks held at the Bankers' Hall in Myeong-dong, Jung-gu, Seoul, Governor Lee told reporters, “There has been a strong awareness of the issue regarding whether it is appropriate for banks to reduce costs in a way that can be seen as predatory and to use their dominant position in the market,” adding, “The supervisory authorities emphasizing public interest means a self-reproach or reflection that perhaps we have not paid enough attention to aspects such as interest rate competition in the market, product diversification, and enhancement of consumer welfare.”

Regarding the ‘Social Contribution Project’ worth over 10 trillion won announced by the banking sector on the 15th, Governor Lee said, “There are aspects that somewhat deviate from the core issue,” and evaluated, “While financial consumers raise problems related to the failure of the competitive function of finance, the response seems to be helping those on the other side even though the problem is being raised here.” This is interpreted as pointing out that the banking sector’s measures remain at the level of simple financial support rather than enhancing financial consumer benefits.

He added, “I understand that there is much more sincerity and that the Korea Federation of Banks has put a lot of thought into it compared to the past,” but also said, “There is an awareness of the problem as to why the public still does not trust this and whether the expenditures were appropriate or not, which could be examined.” He emphasized, “What matters is not the golden calf three years later, but the immediate need for a sip of water in our hands right now.”

When asked about the reform of the banking sector’s performance-based compensation system, he explained, “There is a basis in laws such as the Governance Act to assess the appropriateness of the performance-based compensation system,” and said, “We will comprehensively review whether the current (bank) performance is truly the result of individuals or organizations, and whether the performance is shared in the short term despite the possibility of additional losses in the mid to long term, and how to measure indicators in the mid to long term to improve this.”

Regarding the banking oligopoly system, he stated, “We need to think more about whether there is room to promote more competition among major banks,” and added, “If effective competition has not occurred among the four major financial holding companies, other regional banks, internet-only banks, and foreign banks, we will consider why it has not happened.”