Increased Burden on Ordinary Citizens and Small Business Owners Amid High Interest Rates and Inflation Crisis
Assemblyman O Gi-hyeong: "Banks Achieve Record Profits... Need to Strengthen Social Responsibility"
Last year, as the number of low-income earners and small business owners facing difficulties due to a complex crisis of high interest rates and high inflation increased, the amount of subrogation payments by financial public institutions such as the Korea Housing & Urban Guarantee Corporation and the Korea Credit Guarantee Fund more than doubled. Subrogation refers to the act of repaying debt when the borrower fails to repay the principal, and as banks recorded record-high profits, there are growing calls to strengthen the social responsibility of banks.
According to data submitted on the 22nd by Oh Ki-hyung, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, from 13 financial public institutions and financial public enterprises conducting guarantee businesses, the subrogation amount of these guarantee institutions last year was recorded at 13.4412 trillion won. This is a 130.6% increase compared to the 5.8297 trillion won in subrogation payments in 2022.
Among the 13 guarantee institutions including the Korea Housing & Urban Guarantee Corporation, Korea Housing Finance Corporation, Seoul Guarantee Insurance, Korea Inclusive Finance Agency, Korea Credit Guarantee Fund, Regional Credit Guarantee Foundations, Korea Technology Finance Corporation, Export-Import Bank of Korea, Korea Development Bank, Industrial Bank of Korea, Korea Trade Insurance Corporation, Korea Ocean Business Corporation, and Korea Asset Management Corporation, the institution with the highest subrogation amount was the Korea Housing & Urban Guarantee Corporation.
The Korea Housing & Urban Guarantee Corporation's subrogation amount last year surged by 365.3% to 4.9229 trillion won from 1.0581 trillion won in 2022. This was the result of a sharp increase in lease fraud and lease deposit return guarantee incidents amid the real estate market downturn. As the economic situation of self-employed individuals and small business owners worsened, the subrogation amounts of the Korea Credit Guarantee Fund and Regional Credit Guarantee Foundations also increased significantly. The Korea Credit Guarantee Fund's subrogation amount rose by 67.4% from 1.3599 trillion won in 2022 to 2.2759 trillion won in 2023. The Regional Credit Guarantee Foundations' subrogation amount increased by 237.4% from 507.6 billion won to 1.7126 trillion won during the same period.
Following this, the Korea Housing Finance Corporation's subrogation amount increased from 337.5 billion won to 635.7 billion won, the Korea Technology Finance Corporation's from 494.6 billion won to 959.6 billion won, the Korea Inclusive Finance Agency's from 367.3 billion won to 1.0149 trillion won, and Seoul Guarantee Insurance's from 1.2409 trillion won to 1.6464 trillion won, all showing significant increases.
Meanwhile, banks achieved record-high profits. Last year, the net income of domestic banks was 21.3 trillion won, an increase of 2.8 trillion won (15.0%) compared to the previous year, marking an all-time high. Interest income reached 59.2 trillion won, up 3.2 trillion won (5.8%) from the previous year, approaching 60 trillion won. Lawmaker Oh Ki-hyung said, "While banks set record-high performances last year, the subrogation amounts of public guarantee institutions more than doubled," adding, "Discussions on strengthening the social responsibility of banks will expand in the next National Assembly."
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