[Reporter’s Notebook]FSS Chief Fails to Deliver After Promising to "Protect Genuine Loan Borrowers"

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), who insisted that "even if household debt management is delayed, genuine borrowers must be protected," has seen his policy of 'protecting genuine loan borrowers' fizzle out. On the 10th, Lee convened the heads of 18 banks but ultimately failed to present any guidelines related to genuine borrowers and ended the meeting by leaving it to the banks' discretion. He had only engaged in verbal interventions without the 'courage to be disliked.'

Last week, Governor Lee repeatedly emphasized that there should be no restrictions on loans for genuine borrowers, hosted meetings with them, and even summoned bank CEOs to discuss countermeasures. However, within a week, he sought an exit with a powerless apology, saying, "I apologize for not delivering a detailed message." During his opening remarks at the meeting, he did not mention genuine borrowers even once. Since the decision was left to the banks' autonomous judgment, it appears the authorities refrained from further mention.

This was predictable. The day before the meeting with the bank CEOs, a senior FSS official expressed frustration in a phone call with reporters, saying, "Can you define genuine borrowers? Even reporters cannot define them, so how can the authorities?" It was deemed unreasonable to set criteria distinguishing genuine borrowers.

The banking sector, which had hoped that Governor Lee would provide a breakthrough to the loan dilemma by summoning the bank heads, was once again left in a quandary. Especially regarding the ambiguous zone between genuine demand and speculative demand, the so-called 'gray zone,' Governor Lee deferred decision-making to the banks, stating that the banking sector should discuss it autonomously.

Banks, which had been raising loan interest rates under pressure from authorities to manage household loans, hurriedly revised all loan limits, qualifications, and terms last month after a single remark from the FSS governor that "interest rate hikes are not what the authorities want." Even second-tier financial institutions like insurance companies joined in creating loan restrictions, and last week, an order was added that "there should be no restrictions on loans for genuine borrowers." Consequently, banks had to scramble to create their own exceptions.

In the end, the FSS governor's apology for causing confusion at frontline branches is meaningless. Since the authorities have left the judgment of genuine borrowers to the banks' discretion, nothing has changed from the perspective of bank employees who must meet loan applicants at the counters. A genuine borrower screening official at a major commercial bank lamented, "If there had been guidelines from the authorities, we could have had some direction, but nothing has changed," and added, "I don't know what the tangible outcome of the bank CEOs' meeting was."

The contradictory stance of emphasizing financial companies' autonomy without clear standards while simultaneously applying pressure only exacerbates market confusion. Moreover, criticism of administrative control over finance continues against Governor Lee, who keeps pressuring banks through various verbal interventions. It should not be forgotten that Governor Lee himself, immediately after taking office, launched a task force to reform shadow regulation (administrative guidance, review guidelines, verbal instructions not specified in laws) financial practices.