Banks at loss over government's inconsistent policies

Financial Supervisory Service (FSS) Governor Lee Bok-hyun speaks at the Korean Institute of Certified Public Accountants headquarters in Seoul, Nov. 6. Yonhap

Local commercial lenders are expressing frustration over the inconsistent policy priorities of financial authorities, according to market watchers.

Amplifying the collective sentiment by the top five lenders – KB Kookmin, Shinhan, Hana, Woori and NongHyup – is Financial Supervisory Service (FSS) Governor Lee Bok-hyun’s open criticism of KB Kookmin Bank for closing 60 branches this year on Nov. 6.

“Nearly 600 bank branches have disappeared since 2020," he said during a meeting with a group of reporters.

“KB Kookmin Bank closed more than 60 branches in the first half of this year, despite repeated calls to enhance access to services for the financially neglected group of people.”

But the recent criticism is baffling, according to local lenders, since the reduction of bank branches is an industry-wide strategy of recent years to help facilitate digitization.

“The move obviously comes at the expense of senior citizens,” an official of a local bank said. “We knew it then and so did the financial authorities. It was an agreement to expedite digitization and cut costs to generate revenue. I think I speak for the entire industry when I say this sudden open calling out leaves us very confused.”

Adding to the sentiment is Lee’s comment on whether the banks’ combined annual profit of 60 trillion won was justifiably innovation-driven, compared to Samsung Electronics and Hyundai Motor, for example.

The third quarter net income of the banks outweighed that of Samsung and Hyundai combined, for the same period, but he said he was skeptical about what innovation efforts led to the lenders making that much money.

“The increase in profits of financial firms is positive in the context of financial stability underpinned by improved capital adequacy, but in the eyes of the public, the figures are not admirable since it was not the result of innovation efforts but instead, due to a surge in interest income over the past pandemic years in a policy rate hike cycle," he said.

However, the banks say that what many characterize as rate hike-induced performance could quickly lose momentum when the central bank adjusts its monetary policy.

“We bear the full brunt of lowered interest rates and subsequent risks if the policy rates take a downward path. The financial authorities do not provide measures to mitigate loss in that scenario. It is a bit much to paint us with a broad brush as villains,” the official said.