Banks bemoan gov't pressure to support vulnerable

Financial Services Commission Chairman Kim Joo-hyun, center, looks at his watch during a meeting with the nation's five financial holding firms, at the Government Complex Seoul, Thursday. From left are KB Financial Group Chairman Yoon Jong-kyoo, Kim and Shinhan Financial Group Chairman Cho Yong-byoung. Yonhap

By Lee Min-hyung

Commercial banks are crying foul over the government's demand that they reduce their interest rates for loans and offer debt relief for financially vulnerable customers, as the brunt of these policies will be borne by the lenders, financial industry sources said, Thursday.

With the latest decision by the Financial Services Commission (FSC), the government will set up what it calls a “new beginning fund” worth 30 trillion won ($22.9 billion) and use the money to help reduce loan principals for borrowers with low credit ratings.

The authority plans to urge banks to participate in the drive, calling on them to take similar steps on behalf of those who cannot benefit from the fund directly.

The banks remained perplexed over the decision by the government, seeing the government pressure on them as unfair.

Financial Services Commission Chairman Kim Joo-hyun, fourth from left, poses with the heads of the country's top five financial holding companies before a meeting at the Government Complex Seoul, Thursday. From left are NongHyup Financial Group Deputy President Bae Bu-yeol, Hana Financial Group Chairman Ham Young-joo, Woori Financial Group Chairman and CEO Son Tae-seung, Kim, KB Financial Group Chairman and CEO Yoon Jong-kyoo and Shinhan Financial Group Chairman Cho Yong-byoung. Kim asked the financial groups to support the financially vulnerable who are having trouble coping with inflation and the surging interest rate. Yonhap

“We consider the decision unfair, as it requires a one-sided sacrifice from the banks,” an official from a commercial lender said. “For instance, those who receive the financial benefit do not have any duty to pay back the principal even if the valuation of their assets, such as cryptocurrencies and stocks, rises.”

These government efforts to push the banks to support the vulnerable constitute “reverse discrimination” against borrowers who pay their principal and interest sincerely, claimed the same official.

“Banks and the government should have more talks with each other to fine-tune the details of the drive,” he said. “This will end up aggravating banks' financial soundness at a time when they have offered financial aid to the self-employed and small business owners since the outbreak of the COVID-19 pandemic.”

The banks fear that the government's efforts to pressure them to support the financially vulnerable ― in particular young people and the self-employed ― could pose a threat to the economy here amid growing financial uncertainties sparked by aggressive rate hikes and concerns of a recession.

Another official from a major bank also said lenders need to take a wait-and-see approach, as no specific guidelines from the government have been shared yet.

“Both sides should discuss further how much of a financial burden banks need to take on when joining the drive,” the official said. “We can set up specific strategies only after receiving feedback from the government, but this is not the case for the time being.”

FSC Chairman Kim Joo-hyun held a meeting Thursday with leaders of the nation's top five financial holding firms -- KB, Shinhan, Hana, Woori and NongHyup -- requesting them to pay more attention to the issue.

“The authority and the financial industry should seek optimal measures on the issue,” Kim said during the meeting.