Financial Services Commission Summons Industry Association Heads After President Lee's Warning on 'Interest Play'

President Lee Jaemyung has issued a warning to domestic financial institutions regarding their so-called 'interest play' practices, prompting financial authorities to convene a meeting with the heads of all industry associations to discuss related measures, including expanding investment.

According to the financial sector on the 27th, the Financial Services Commission plans to hold a meeting on the morning of the 28th to exchange opinions on expanding productive finance. The meeting will be chaired by Vice Chairman Kwon Daeyoung and will be attended by the heads of the Korea Federation of Banks, Korea Life Insurance Association, General Insurance Association of Korea, Credit Finance Association, and Korea Financial Investment Association.

This meeting was urgently scheduled to gather opinions from the financial sector following President Lee's recent remarks about 'interest play.' On the 24th, during a meeting with senior aides, President Lee stated to financial institutions, "Rather than relying on easy interest play such as mortgage lending, I hope you will also pay attention to expanding investments."

Accordingly, the Financial Services Commission is expected to send a message to the financial sector emphasizing the need to shift away from the traditional business model that depends on the interest margin (the difference between deposit and loan interest rates) and to transition toward 'productive finance.'

There are also expectations that the financial sector will participate extensively in the government's currently envisioned '100 trillion won National Fund.' The government plans to establish a fund worth 100 trillion won to support advanced strategic industries such as artificial intelligence (AI), bio, and energy. To raise capital, the government is considering using a 50 trillion won advanced industry fund as a mother fund and increasing the scale through private matching from financial institutions and the general public.

During this meeting, the financial sector plans to propose regulatory improvements to increase corporate and venture investments.

There have been ongoing concerns that, under current regulations, the risk weight for corporate loans is applied excessively high, which could burden banks' capital ratio management if corporate investment increases. The financial authorities are considering revising the risk-weighted assets (RWA) weighting in response to industry demands.