Bahk warns of banks' reckless expansion

Bahk Jae-wan strategy and finance minister

By Kim Jae-won

The nation’s top economic policymaker warned Monday that reckless expansion in the financial industry could threaten the stability of the whole economy, citing the global financial crisis that is still weighing on the global economy.

To prevent those problems, Strategy and Finance Minister Bahk Jae-wan said that the government seeks to lower the risks of financial companies and increase their soundness by tightening regulations on them.

”As proved in the global financial crisis, reckless expansion in the financial sector could make bubbles, generate systemic risks and undermine stability in all macroeconomic conditions,” Bahk Jae-wan said in a keynote speech during a symposium co-hosted by the Korea Institute of Finance and the Korea Financial Engineering Society.

Experts say that Bahk intended to warn local financial institutions which have been focusing on quantitative growth rather than developing their competitiveness.

The minister said the combined total assets of the nation’s financial companies reached 2.4 quadrillion won last year but their global competitiveness still lags behind that of their counterparts in advanced economies.

He also said that the development of the financial industry should be pursued in harmony with the real economy and its stability, asking them to help manufacturers rather than only fatten themselves.

The minister also urged financial companies to brace for an aging society by launching financial services which could compensate the public pension system.

Korea’s state pension accounts for about 40 percent of required income for retirees, far below the average Organization for Economic Cooperation and Development rate of 58 percent, he explained.

Bahk also called on the financial sector to take up "social responsibility" as a crisis in the area could prompt the injection of a tremendous amount of money. He noted that the financial sector should work hard to regain trust, which he believes would result in improving its overall competitiveness.

The minister added that the financial sector could focus more on its fundamental role of supplying capital to the economy.