Banks Actively Support Donation Funds for Heavy Rain Damage Relief

Banks Becoming Kinder... Emphasizing Social Responsibility

[Asia Economy Reporter Park Sun-mi] The banking sector is actively emphasizing social responsibility by providing financial support such as donations for flood damage recovery, loan maturity extensions, and interest deferrals. This move comes amid a decline in the overall image of banks following a series of incidents including the incomplete sales of overseas interest rate-linked derivative-linked funds (DLF) and the large-scale suspension of redemptions of private equity funds by Lime Asset Management and Optimus Asset Management.

According to the financial industry on the 7th, KB Kookmin Bank, together with KB Financial Group, KB Securities, KB Insurance, KB Kookmin Card, and KB Capital, donated a total of 500 million KRW to the National Disaster Relief Association. Hana Financial Group, which includes Hana Bank, also donated 1 billion KRW to the National Disaster Relief Association. The donations will be used to support disaster relief supplies and the restoration of flood-affected areas. Woori Financial Group delivered 100 million KRW to the Korean Red Cross, and Shinhan Bank decided to provide an emergency support fund of 500 million KRW through 24 regional headquarters located in flood-affected areas such as Gangwon, Busan, and Chungcheong regions.

Separately from the generous donations, banks have also prepared financial support measures such as special loans, maturity extensions, and preferential interest rates for affected customers. Kookmin Bank will provide up to 20 million KRW as emergency living stabilization funds for personal loans. For corporate loans to small and medium-sized enterprises and self-employed individuals, working capital loans will be supported up to 500 million KRW, and facility funds will be provided within the scope of funds required for restoring damaged facilities. For household loans, a preferential interest rate of up to 1.5%p and for corporate loans up to 1.0%p will be applied without additional principal repayment, and loan maturity extensions will be granted.

Hana Bank will provide new emergency management stabilization funds of up to 500 million KRW per company to small and medium-sized enterprises, mid-sized companies, and individual business owners. It supports loan maturity extensions for up to one year and defers installment repayments for up to six months. For affected corporate customers, interest rate reductions of up to 1.3%p will be supported. Shinhan Bank will provide a total of 100 billion KRW in emergency financing. For small and medium-sized enterprises, it will provide new funding support of up to 300 million KRW per company totaling 80 billion KRW, along with maturity extensions, installment repayment deferrals, and preferential interest rates. For individual customers, it will provide emergency living stabilization funds totaling 20 billion KRW with a limit of 30 million KRW per person.

Woori Bank will support working capital loans up to 500 million KRW and facility loans within the recognized damage amount for affected small business owners and small and medium-sized enterprises. Residents in affected areas can receive emergency living funds loans up to 20 million KRW per individual, and also receive support such as up to 1%p interest rate reductions, payment of agreed interest upon early termination of savings and deposits, and exemption of counter remittance fees.

On the 4th, the Financial Services Commission announced a financial support plan that encourages commercial banks to grant a grace period and maturity extensions for principal and interest repayments of loans to flood-affected companies and individuals, aligning the banking sector’s recent actions with the financial authorities’ support policies and direction.

However, as the banking sector has recently gained a public image of evading responsibility despite causing customer losses in the DLF, Lime, and Optimus incidents, there are criticisms that the flood damage support is a 'face-saving' move to recover their tarnished image. Although banks have prepared financial support measures, it remains uncertain how much will actually be executed. In past summer floods in 2002 and 2006, banks introduced similar financial support measures, but usage was extremely low, leading to criticisms of ineffectiveness. The financial support measures announced by banks are also criticized as uniform and 'showy' routine support.

Meanwhile, as criticism grows that banks are overly focused on profits, the emphasis on social responsibility in the banking sector is strengthening. Banks have recently been actively issuing ESG bonds (bonds issued to raise funds for improving environment, social, and governance factors). This month, Woori Bank issued 300 billion KRW worth of won-denominated ESG bonds to be used for financial support targeting small business owners and small and medium-sized enterprises. Last month, NongHyup Bank issued its first ESG bond worth 500 million USD. KB Financial Group established the first 'ESG Committee' within its board of directors in the financial sector and plans to increase ESG product investments and loans to 50 trillion KRW by 2030.

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