Lee Bok-hyun, on Bank Loan Interest Rate Hikes: "Strongly Feel the Need for Intervention"

Lee Bok-hyun, Governor of the Financial Supervisory Service, said on the 25th that although the banking sector is responding to the recent surge in household loans by raising loan interest rates, "we have intervened less in terms of bank autonomy, but going forward, considering the real estate market situation, it seems necessary to intervene more strongly."

Lee Bok-hyun, Governor of the Financial Supervisory Service, is attending and speaking at the Securities Company CEO Meeting held on the 3rd at the Korea Financial Investment Association in Yeouido, Seoul. At the meeting, solutions for real estate PF and major issues in the securities industry were discussed. Photo by Jo Yong-jun jun21@

Governor Lee appeared on KBS's 'Sunday Diagnosis Live' that morning and stated, "The recent rise in household loan interest rates by banks is not what the authorities wanted." Recently, as household loans surged in the banking sector, banks have raised mortgage loan interest rates to slow down the pace.

He said, "Household loans increased more than the schedule set by banks at the beginning of the year, and raising interest rates in response is easy because it earns a lot of money and suppresses demand," adding, "What the authorities wanted was portfolio management in advance, not an easy interest rate hike."

He also mentioned the situation where interest rates in the primary financial sector have become higher than those in the secondary financial sector such as insurance companies due to the banks' loan interest rate hikes, saying, "A kind of distortion phenomenon is occurring," and reiterated, "It is wrong for banks to raise the amount (interest rate) instead of managing volume or appropriate micro-management."

Conscious of criticism that the authorities are engaging in artificial interest rate intervention, Governor Lee explained, "There were only about two explicit interventions," adding, "Regarding the fund flow into bank bonds caused by the Legoland incident, we intervened based on relevant laws due to the nature of the system crisis and prevented systemic risk."

Regarding the continued rise in housing prices centered around Seoul and other areas recently, he also announced strong additional measures. Governor Lee said, "It is not enough to rely solely on the Debt Service Ratio (DSR)," and added, "If the trend of increasing loans continues after September, we are internally reviewing plans to implement measures stronger than those currently in place."