Reporter's Notebook Self-serving excuse of FSC for borrowing rate hike
FSC Chairman Koh Seung-beom. Korea Times file
By Lee Kyung-min
It is incredibly hard to be a person of principle, especially when circumstances are unfavorable.
It is all the more so, if you are the top policymaker or regulator in testing times with pressure mounting from those in power whose only priority ahead of the presidential election next year is to dispel the groundswell of public outcry brought on by a steep increase in housing prices.
Despite ― and precisely because of ― the context, the recent series of explanations by Financial Services Commission (FSC) show how a combination of a lack of logic and desperation can end up becoming a source of embarrassment and derision.
FSC Chairman Koh Seung-beom said early this month that the recent sharp increases in borrowing rates offered by commercial lenders are explained by market principles and therefore do not warrant government intervention.
“How the banks set profit margins from the difference in interest between deposit and loan remains corporate policy. It is inappropriate for me to comment on private activities,” he said, Nov. 3.
The move was to clearly insulate himself from the required role of FSC head to ease public fury over the annual borrowing rates for mortgages touching almost 5 percent.
The rates offered by commercial lenders even exceeded those offered by non-bank financial institutions, an indication of how banks are becoming unprincipled in raising the rates on the back of the FSC's deliberate failure in oversight. Rates charged by institutions encompassing insures, card issuers and savings banks are usually significantly higher than those of commercial lenders.
The stance is all the more problematic, given precedents set by former FSC Vice Chairman Kim Yong-beom whose verbal warnings kept commercial lenders' collective greed in check.
Kim said in 2017 that lenders will come under enormous criticism if they arbitrarily increase the spread on retail loans, a stern warning followed by announcements on plans to review how banks set retail loan borrowing rates and penalize them for irregularities.
Also backing the drive at the time were warnings issued by Financial Supervisory Service (FSS), supervised by the commission, to banks over suspected irregularities in setting the rates. The mere announcements by the supervisory organization ― a source of great fear for banks ― had a significant effect in reining in rates at the time.
But the much-needed warnings are nowhere to be found, incentivizing banks to profit with total disregard for the livelihoods of borrowers including “jeonse” tenants and young people who have taken out mortgages and jeonse loans. Unique to Korea, jeonse is a home renting system whereby tenants pay a lump sum refundable deposit instead of monthly rent.
Many jeonse tenants are left to choose between a significantly large increase in deposit or eviction, an ultimatum given by landlords who seek to pass the burden of heavier real estate tax onto their tenants.
Housing values and by extension taxes due for homeowners have more than doubled over the past few years, almost exclusively because of the government's two dozen botched real estate policies.
The government repeatedly rationalized its policy drive in the form of tightening lending rules and heavier taxes on homeowners, railroading them despite continued fierce criticism that the measures were pushed in absolute disregard of market principles.
Where is the government resolve that heralded consumer protection as if it was an honorable value never to be compromised with?
Where is the sanctity of the principle when people most need it?
Perhaps, Koh should not have mentioned market principles at all and have been honest that he was under orders from Cheong Wa Dae that snowballing household debt should be promptly brought under control.
The only thing more repulsive than political engineering and gamesmanship is seeing someone feigning unwavering integrity citing principles only when it suits them.