Governor Lee Chanjin Remains Silent on Separation of Financial Consumer Protection Department and Appointment Rumors (Comprehensive)

If Savings Banks Improve Asset Quality, M&A Regulations May Be Eased
"Prioritize the Protection of Financial Consumers, Including Ordinary Citizens and Small Business Owners"
Savings Bank Industry Requests Easing of the June 27 Household Loan Ca

Lee Chanjin, Governor of the Financial Supervisory Service, was reserved in his comments on September 4 regarding the government's organizational restructuring plan to separate the Financial Consumer Protection Department and establish it as an independent agency, the Financial Consumer Protection Agency. He also declined to comment on rumors about his possible appointment as the next head of the new agency.

Lee Chanjin, Governor of the Financial Supervisory Service (left), attended the "Savings Bank Chief Executive Officer (CEO) Meeting" held at the Korea Federation of Savings Banks in Mapo-gu, Seoul, on the 4th, and is seen talking with Oh Hwakyeong, Chairman of the Korea Federation of Savings Banks, before the meeting started. 2025.09.04 Photo by Yoon Dongjoo

Governor Lee made these remarks when he met with reporters just before the Savings Bank Chief Executive Officer (CEO) Meeting held at the Korea Federation of Savings Banks in Mapo-gu, Seoul, on this day.

Governor Lee left the venue without answering questions from the press regarding the separation of the Financial Consumer Protection Department or the rumors about his appointment as the next head of the Financial Consumer Protection Agency. He also did not respond to questions about the direction of consumer protection policies for savings banks or efforts to address real estate project financing (PF) issues.

At the meeting, Governor Lee instructed savings banks to strengthen their security infrastructure and internal controls to ensure that financially vulnerable consumers visiting savings banks are not exposed to financial crimes such as voice phishing.

He also offered an incentive to savings bank CEOs, stating that if they manage asset soundness well, regulations on mergers and acquisitions (M&A) could be eased. The delinquency rate in the savings bank sector is higher than in other financial sectors. According to the Financial Supervisory Service, the delinquency rate for the 79 savings banks nationwide was 6.55% at the end of 2023, 8.52% at the end of last year, and 7.53% as of the end of the first half of this year (June 30). As of the end of the first half, this rate was higher than that of banks (0.52%), insurance companies (0.83%), and even mutual finance institutions (5.7%).

Governor Lee added, "In the second half of the year, we must ensure soundness by continuing to resolve non-performing project financing (PF) assets, accumulating sufficient loan loss reserves, and expanding capital," and further explained, "If concerns about soundness are resolved, discussions on easing business district restrictions and M&A regulations will also gain momentum."

The savings bank CEOs attending the meeting requested that, regarding the June 27 household loan total volume regulation, at least mid-interest rate loans be exempted from the annual income limit regulation for unsecured loans. They also called for the easing of regional mandatory lending ratios, the relaxation of M&A regulations, the raising of investment limits in marketable securities, and the reduction of deposit insurance premium rates, addressing long-standing industry demands.

Savings banks are regulated to operate within six business regions: Seoul, Incheon-Gyeonggi, Busan-Gyeongnam, Daegu-Gyeongbuk-Gangwon, Honam, and Chungcheong. Currently, savings banks in the metropolitan area must supply 50% of their loans within their region, while those outside the metropolitan area must supply 40% within their respective regions. However, due to the economic downturn and the contraction of the real estate market, it is not easy to increase loan demand in non-metropolitan areas.

Expanding the investment limit in marketable securities is one of the long-standing wishes of the savings bank sector. Investment in marketable securities refers to the management activity of purchasing stocks or corporate bonds of other companies to enhance profitability. According to the Mutual Savings Bank Supervision Regulations, savings banks can invest in stocks up to 50% of their equity capital. Investments in stocks and corporate bonds of unlisted companies are limited to 10% of equity capital. Investments in collective investment securities (funds) are limited to 20% of equity capital. The total investment in marketable securities must not exceed 100% of equity capital.

Meanwhile, the savings banks participating in the meeting were distributed by business scale and region. The five major mid- to large-sized savings banks were SBI, OK, Welcome, Shinhan, and Moa Savings Bank. The six regional savings banks were Yuanta (Seoul), Geumhwa (Incheon-Gyeonggi), Jinju (Busan-Gyeongnam), Oseong (Daegu-Gyeongbuk-Gangwon), Star (Honam), and Hanseong Savings Bank (Chungcheong). Since the primary role of savings banks is to provide financial support to local residents and small business owners, the intent was interpreted as listening to the voices of not only large savings banks but also small and medium-sized regional savings banks.

Oh Hwakyeong, Chairman of the Korea Federation of Savings Banks, said, "Governor Lee asked us to focus on consumer protection in the second half of the year, following the emphasis on improving (soundness) indicators in the first half. Detailed matters will be organized and promoted through the Financial Supervisory Service and savings bank sector task force (TF)," and added, "There was a request from CEOs to ease regulations on mid-interest rate loans under the June 27 household loan total volume regulation, and since the main customers of savings banks, ordinary people, are unable to leverage smoothly due to regulations, we also discussed ways to activate funding for daily living expenses."