"Bank's Win-Win Efforts Do Not Conflict with Strengthening Soundness"
"Regarding Concerns over PF Loan Defaults, Efforts Are Underway to Diversify Risks"
Lee Bok-hyun, Governor of the Financial Supervisory Service, dismissed the possibility of the introduction of challenger banks (small-scale specialized banks) being scrapped following the bankruptcy of Silicon Valley Bank (SVB) on the 24th.
After the ‘Shinhan Bank Win-Win Finance Meeting’ held at Shinhan Bank’s headquarters in Jung-gu, Seoul, Governor Lee told reporters, “It is difficult to see challenger banks in the narrow sense as being the same as SVB, and there are various opinions on whether the cause of SVB’s failure was because it was a specialized bank or due to liquidity management issues,” adding, “Excluding the introduction because of SVB’s bankruptcy is not desirable at this stage.” He further added, “We understand that the possibility of a situation occurring domestically with the same risks or vulnerabilities as the SVB bankruptcy incident is low.”
Following the recent SVB incident, concerns about risk management issues in specialized banks have been raised, leading to opinions that caution is needed regarding the introduction of challenger banks being discussed by financial authorities.
Governor Lee also refuted claims that the need to strengthen bank soundness due to SVB’s bankruptcy contradicts the expansion of win-win finance. He explained, “If the burden and pain on households and small business owners increase due to interest rate pressures, it can act as a risk factor,” and added, “Efforts by banks to promote win-win finance are meaningful in reducing overall systemic risk caused by household loans when viewed broadly.”
Regarding concerns about the deterioration of real estate project financing (PF) loans domestically, he stated, “Following the savings bank incident, industry practices and the financial authorities’ management systems have become much more advanced and sophisticated,” but emphasized, “It is a reality that defaults can inevitably be reflected in the flow of bridge loans or main PF loans, so financial authorities are monitoring to ensure that excessive concentration or sudden occurrences do not act as ‘trigger points’ for specific regions, companies, or business sectors, and are making efforts to diversify risks.”
On the direction of improving the bank performance bonus system, he said, “The essence is to receive appropriate performance bonuses corresponding to actual contributions and the timing of those contributions,” and added, “A performance bonus system that shareholders and the public can predict should be established.”
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