Kim Byung-hwan: "No Concerns Over Bank Soundness Due to Exchange Rate... Woori Financial Will Take Strict Measures If Necessary"

"Banking Sector BIS Ratio Sufficiently High"
"Prompt Review and Consultation to Reflect Loan Rate Cuts Quickly"

Kim Byung-hwan, Chairman of the Financial Services Commission, stated on the 24th that there is no significant problem with the soundness of the banking sector despite the rise in the won-dollar exchange rate. Regarding the recent scandal involving improper loans at Woori Financial Group, he said, "We take this very seriously and are concerned," adding, "Accordingly, the Financial Supervisory Service is currently conducting an inspection, and the prosecution is also investigating. We will observe the results with a strict awareness and take necessary measures firmly if needed."

Chairman Kim appeared on KBS's 'Sunday Diagnosis Live' that morning and emphasized, "Currently, all banks maintain a BIS ratio well above the standard, so while there may be some impact, it is not at a level to cause concern." He added, "As a supervisory authority, we will pay attention to these concerns and conduct inspections."

This comment relates to recent concerns raised by Jin Ok-dong, Chairman of Shinhan Financial Group, who warned that "if the won-dollar exchange rate remains around 1,400 won by the end of the year, it could burden financial institutions' BIS ratios." When the exchange rate rises, the size of risk-weighted assets increases when foreign currency assets are converted into won, causing the BIS ratio, which is the ratio of capital to risk assets, to decline.

Chairman Kim also addressed the recent issue of the widening interest rate spread between loans and deposits in the banking sector. Despite the base interest rate falling, banks have been criticized for raising loan interest rates and lowering deposit rates in line with the financial authorities' household loan management policy, effectively engaging in "interest margin business." In response, Chairman Kim said, "On a balance basis, the interest rate spread between loans and deposits is narrowing due to the base rate cut and increased competition," adding, "We will review and discuss measures to ensure the effects of existing loan rate cuts are reflected more quickly."

Regarding household debt, Chairman Kim explained, "The household debt-to-GDP ratio has been stabilizing downward since 2022," but noted, "Recently, linked to the real estate market, it has been increasing rapidly in the second half of the year, leading to the introduction of the second-stage Debt Service Ratio (DSR) from September."

Concerning recent embezzlement incidents in the financial sector, he announced that the 'Accountability Structure' system will be implemented starting next year. Chairman Kim said, "This system clearly defines the person responsible for each specific task and is expected to have a significant preventive effect."

Regarding the adjustment of the deposit insurance coverage limit increase (from 50 million won to 100 million won), he explained, "The National Assembly is discussing flexible application of the implementation timing, considering market impact due to fund movement and soundness issues."

On the issue of real estate project financing (PF), he assessed, "Less than 10% of the total PF is identified as having poor viability," and diagnosed that "it is undergoing a soft landing rather than the initially feared situation."