[2020 National Audit] Savings Banks and Loan Businesses' Operating Profit Increased by 45%... "Sufficient Room to Lower Maximum Interest Rates"

Min Hyung-bae, Democratic Party Lawmaker, Analyzes FSC Data
Savings Banks and Loan Businesses Recorded Operating Profit of 1.7894 Trillion Won Last Year

Min Hyung-bae, Democratic Party of Korea lawmaker

[Asia Economy Reporter Kim Min-young] Contrary to expectations that the reduction of the legal maximum interest rate would worsen profitability, the operating profits of savings banks and the loan industry actually increased by as much as 45%. In the political sphere, voices calling for a further reduction of the maximum interest rate are emerging based on this data.

According to data submitted by the Financial Supervisory Service to Min Hyung-bae, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, the operating profits of the top 20 loan companies and the top 20 savings banks last year amounted to 1.7894 trillion KRW, an increase of more than 45% compared to 1.2279 trillion KRW in 2017.

The legal maximum interest rate was lowered from 27.9% per annum in 2016 to 24% per annum in 2018. Although there have been efforts to reduce it further to 20% per annum, a pledge of the Moon Jae-in administration, these attempts have repeatedly failed due to arguments from the industry and financial authorities about the influx of illegal private loans targeting financially vulnerable groups and the potential collapse of high-interest lenders. In response, Representative Min argued that the operating conditions of loan companies and savings banks have not deteriorated but rather improved following the reduction of the maximum interest rate.

Looking at the top 20 savings banks, the loan balance increased from 8.1242 trillion KRW in 2017 to 13.6597 trillion KRW. The number of borrowers rose from 880,000 to 1.12 million, and total revenue grew from 3.7266 trillion KRW to 4.8103 trillion KRW. Operating profit increased from 687.1 billion KRW to 1.0667 trillion KRW. Both net income and asset size also increased. All management indicators improved.

The loan industry also saw improvements. Although the loan balance and number of borrowers among the top 20 companies decreased to 6.4143 trillion KRW and 1.32 million respectively compared to 2017, business performance improved. Total revenue increased from 2.1868 trillion KRW to 2.4700 trillion KRW, operating profit rose from 540.8 billion KRW to 722.7 billion KRW, and net income grew from 497.3 billion KRW to 566.9 billion KRW.

Representative Min stated, “The arguments put forward by the industry and financial authorities whenever the legal maximum interest rate was lowered did not align with actual indicators,” and added, “Since the 20% maximum interest rate was also a pledge of the Moon Jae-in administration, the maximum interest rate should be lowered promptly to protect financially vulnerable groups.”

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