Financial Authorities "Significantly Expand Debt Refinancing for Self-Employed Using Secondary Financial Sector to Reduce Interest Burden"

June 27 Financial Services Commission, Financial Supervisory Service - Meeting with Heads of 17 Banks
Bank Accountability Structure Must Be Submitted by June

Financial Services Commission Chairman Kim Ju-hyun is speaking at the 'Meeting between the FSC, FSS, and Bank Presidents' held on the 27th at the Korea Federation of Banks building in Jung-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

The financial authorities announced that they will work to reduce the interest burden not only for general banks but also for self-employed individuals and small business owners using secondary financial sectors such as savings banks and loan companies.

On the 27th, Financial Services Commission Chairman Kim Ju-hyun stated at a meeting between the FSC, Financial Supervisory Service, and bank presidents, "We will consider measures such as significantly expanding the scope and support level of low-interest refinancing programs for self-employed and small business owners who use high-interest secondary financial sectors." The meeting was held in the afternoon at the Korea Federation of Banks in Myeong-dong, Seoul, attended by Kim Ju-hyun, Chairman of the FSC, Lee Bok-hyun, Governor of the Financial Supervisory Service, Kim Kwang-soo, Chairman of the Korea Federation of Banks, and presidents of 17 banks.

Chairman Kim said, "I hope to make the banking industry one that can proudly say it belongs to the banking sector," adding, "We need to instill in the public the perception that bank employees are trustworthy, that banks stand by people in difficult times, and that they are smart people innovating with advanced technology."

Regarding the 'Governance Act Amendment,' which passed the National Assembly's Legislation and Judiciary Committee on the 21st, he said, "It is an institutional support to ensure that bank employees share the awareness that banks must operate morally."

On the household debt issue, he said, "Household debt is not yet at a level that significantly threatens the stability of the financial system, but there is a possibility that growth potential will decline and households' income-generating ability to repay debt will not recover quickly."

He continued, "The government clearly recognizes that excessive household debt exceeding the GDP size is a problem, and from the perspective of 'sustainable growth' of our economy, it is important for the banking sector to actively pay attention and make efforts to manage household debt," adding, "Please consider not only efforts to improve borrowers' repayment ability but also the appropriate scale of household debt from a macroprudential perspective."

He also emphasized, "There is a difficult issue between managing household debt and supporting vulnerable groups," and said, "Reducing the debt repayment burden for those who have endured the COVID-19 period with debt protects the bank customer base in the mid-to-long term and aligns with the financial authorities' policy efforts to improve the quality of household debt."

Lee Bok-hyun, Governor of the Financial Supervisory Service, is speaking at the 'Meeting between the Financial Services Commission, Financial Supervisory Service, and Bank Presidents' held on the 27th at the Korea Federation of Banks building in Jung-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

Governor Lee of the Financial Supervisory Service said, "I hope the banking sector strengthens its fund intermediation function and social role to become a strong pillar of our economy," and urged, "Especially, bank presidents should pay attention to ensure that funding for low- and medium-credit borrowers is provided without neglect according to each bank's situation."

He added, "Financially marginalized groups are increasingly exposed to non-face-to-face financial crimes, causing serious damage," and emphasized, "We recently prepared a comprehensive response plan with the banking sector, and I hope the banks take the lead in eradicating financial crimes that harm people's livelihoods."

The 17 banks are currently identifying the status of related loans by bank to prepare measures to reduce interest burdens for self-employed individuals and small business owners. At the government level, a task force (TF) involving related ministries and agencies was launched to support these discussions, holding its first meeting on the 22nd.

Also, since the Governance Act Amendment will be applied primarily to the banking sector in the future, banks have agreed to proactively make efforts. Banks and holding companies must mandatorily submit governance structure charts six months before the law takes effect. Later, this will be expanded to financial investment companies, insurance companies, credit finance companies, and savings banks.

The financial authorities plan to enhance mutual understanding between the government and financial sectors by holding meetings with other financial sectors such as insurance, financial investment, credit finance, savings, and mutual finance by the end of the year, starting with this bank presidents' meeting, to communicate on financial issues in each sector.