Financial Supervisory Service Chief Urges Banks to Refrain from High-Interest Deposit Competition

'Financial Situation Review Meeting' Held on the 21st

Lee Bok-hyun, Governor of the Financial Supervisory Service, is attending the meeting between the Financial Services Commission Chairman and the Financial Association Presidents held at the Press Center in Jung-gu, Seoul on the 22nd, delivering opening remarks. Photo by Yoon Dong-joo doso7@

Lee Bok-hyun, Governor of the Financial Supervisory Service, has called for restraint in the banking sector's competition to attract high-interest deposits. At the 'Financial Situation Review Meeting' held on the 21st, Governor Lee stated, "The competition to re-attract high-interest deposits handled in the fourth quarter of last year could act as an unnecessary source of market instability due to concerns over rising short- and long-term funding and loan interest rates." He added, "We will closely monitor phenomena such as concentration in the short-term money market, stock and bond markets, deposit and loan markets, and whether competition for deposits and loans is overheating."

If banks' high-interest deposits lead to an increase in loan interest rates, the burden on borrowers will increase. This also raises bond yields, causing corporate paper (CP) rates to rise and triggering instability in the bond market.

Governor Lee said, "We will strengthen the assessment of borrowers' repayment capacity to ensure that household debt does not become a macroeconomic burden," and added, "We will block financial companies' competition for external growth and excessive lending."

He also stated, "Since prolonged high interest rates may expand insolvency among small and medium-sized enterprises (SMEs), banks will be guided to objectively evaluate the degree of financial vulnerability caused by increased repayment burdens in a high-interest environment, as well as the sustainability of business activities and business models when assessing SME credit risk, thereby promoting a soft landing."

Governor Lee said, "With the upcoming holiday season, telecommunication financial fraud is expected to surge, so we will thoroughly carry out joint voice phishing prevention campaigns across the entire financial sector," and added, "To prevent damages from illegal high-interest private loans and similar unauthorized fundraising, we will continue customized illegal private loan damage prevention promotions linked to victims' age, type of damage, and the characteristics of individual promotional channels and methods."