FSS to help financial firms go abroad

By Na Jeong-ju

The globalization of Korean financial firms has been a pressing issue for policymakers for years.

Korean banks have made inroads into emerging Asian markets since the early 2000s, but they have been largely unsuccessful. They are now being told to choose the “niches” where they can win, instead of talking about unrealistic visions and pursuing growth strategies like HSBC and Citi.

Simply put, they are not as competitive as the manufacturing sector. Then, is it impossible to create the equivalents of Samsung, Hyundai and POSCO in the financial sector?

Financial Supervisory Service (FSS) Governor Choi Soo-hyun says Korean banks hate to take risks, only being dependent on the easiest way of making money ― interest income.

“Their biggest revenue source is the difference between borrowing and lending rates. That makes their profitability remain very low,” Choi said in an interview on Thursday.

“Unlike the manufacturing sector, there are no creative and innovative companies in the financial sector. We need long-term and realistic strategies to address this.”

Choi said one of the solutions is to develop industry-academia cooperation programs to nurture global-minded financial talents.

“One big challenge for Korean firms is the lack of human resources that can lead changes. That’s a structural problem,” the 58-year-old governor said. “See what Korean firms are doing in the private equity, asset management and M&A sectors. They lag far behind foreign financial institutions. We should invest in nurturing talent that can compete in these areas.”

According to a recent report from the global consultancy McKinsey & Company, high value-added financial services, such as banking and asset management, create more than 7 percent of the gross domestic product of countries like the United Kingdom, Singapore and Hong Kong, but they generate only about 4.7 percent of GDP in South Korean. If Korea can close half the gap with the U.K., it could create an additional value worth $11 billion, or 1 percent to GDP. This could also generate 160,000 high-value jobs, and create positive spillover effects on related industries, such as legal, accounting and advertising, the report said.

Choi said he will gradually ease regulations that pose barriers for Korean firms seeking overseas expansion.

“Korean firms have many advantages. They have a superb information technology-based transaction system. Their Internet banking systems are easy and convenient to use,” he said. “And their services at branches are very customer-oriented. These are their selling points. Korean firms have high growth potential, and our job is to help them utilize their potential.”

Customer-oriented

He said improving regulatory services is one of his priorities.

Choi has repeatedly vowed to protect consumers from unfair business practices committed by financial firms, saying regulatory services should be more consumer-oriented.

As part of the plan, the FSS plans to create an independent committee, through which consumers can demand investigations into certain firms. It is also considering spinning off a bureau to handle consumer complaints in an effort to improve services for the public.

“Becoming more consumer-oriented is a matter of culture. Financial supervisors should serve the needs of the public,” Choi said. “I often tell my staff to go out and meet with as many clients as possible. That’s how they can work better. Being customer-oriented should be the basic principle for not only financial firms but also financial supervisors.”

The FSS recently vowed to halve the number of consumer complaints against insurance firms, the biggest source of complaints among financial firms. It has strengthened the punishment of firms and their CEOs involved in violations regarding sales and management of insurance policies.

In July, it also plans to examine whether insurers have violated regulations in the process of charging premiums to policyholders. This is the first time for the FSS to conduct such a probe since it was established in 1999.