[Weekly Savings Banks] Catching Two Rabbits: Restoring Trust and Easing Regulations

[Asia Economy Reporter Kim Min-young] The savings bank industry has declared a consumer-centric management approach this year while simultaneously putting all efforts into achieving the long-standing industry wish of ‘regulatory relaxation.’ There is a diagnosis that these two goals could potentially conflict, so the industry must devote careful attention to successfully capturing both ‘rabbits.’

◆ Efforts to Restore Customer Trust

The savings bank industry has pledged a voluntary commitment to consumer-centric management.

According to the Korea Federation of Savings Banks, at the industry’s New Year meeting held on the 6th at the Sejong Hotel in Jung-gu, Seoul, the CEOs of savings banks pledged a voluntary commitment, stating, “It is very important for savings banks to prioritize consumer protection and rights through customer-centric management.”

The voluntary commitment document includes 11 detailed action tasks across three areas: practicing management to restore customer trust, fulfilling the fundamental role as a financial institution for ordinary citizens by strengthening inclusive finance, and preparing for a new 50 years together with customers ahead of the 50th anniversary in 2022.

Park Jae-sik, Chairman of the Korea Federation of Savings Banks, said, “Since the large-scale restructuring of savings banks, there have been significant achievements such as improved financial soundness and strengthened internal controls, stabilizing management conditions,” adding, “For the continuous growth and development of savings banks, consumer-centric management that prioritizes consumer protection and rights is necessary.”

Jae-sik Park, President of the Korea Federation of Savings Banks

Chairman Park continued, “We expect this voluntary commitment to serve as a turning point for improving awareness among all savings bank employees and restoring customer trust,” and said, “Savings bank representatives will further strengthen efforts to practice customer-centric management and protect consumers going forward.”

◆ Federation’s Top Priority: ‘Regulatory Relaxation’

The industry is also launching an all-out campaign for regulatory relaxation this year. The Federation plans to actively persuade financial authorities to ease various regulations, which are a long-standing wish of its 79 member companies.

The Federation has set regulatory relaxation as its number one priority this year and is focusing efforts on persuading financial authorities to amend the Savings Banks Act and supervisory regulations.

Last year, the Federation already conducted research projects to review various regulations and identified on-site difficulties.

The top priority is differentiated supervision based on the size of savings banks. Currently, the industry applies the same regulations to both large companies with assets exceeding 8 trillion won and small companies with assets around 24 billion won. The opinion is to divide large, medium, and small companies according to asset size and ease unnecessary regulations on smaller companies.

Relaxation of business area regulations is also a long-standing wish. Savings banks are divided into six regions nationwide?Seoul, Gyeonggi-Incheon, Gangwon-Chungcheong, Gwangju-Jeolla, Daegu-Gyeongbuk, and Busan-Ulsan-Gyeongnam?and are prohibited from operating outside their designated regions. However, since the 2011 savings bank insolvency crisis and subsequent consolidation process, some savings banks operate in up to five regions, rendering the regulation practically ineffective, according to the industry.

The joint liability regulation, which is excessively imposed only on savings bank executives, is also a target for relaxation. Savings bank executives bear joint liability to repay debts if they cause damage to the savings bank or others through intentional or negligent acts, whereas in other financial sectors such as banks, insurance companies, and securities firms, executives are liable only if they commit intentional or ‘gross’ negligence. The industry claims that this regulation discourages talented financial professionals from becoming savings bank executives. The prohibition on mergers and acquisitions (M&A) among savings banks is also considered an ‘outdated regulation.’

In his New Year’s address, Chairman Park stated, “We will comprehensively review regulations on savings banks and propose to financial authorities the removal or improvement of regulations that are unfair or unreasonable, thereby establishing an institutional foundation for sustainable growth.”

This content was produced with the assistance of AI translation services.