Moody's "Prolonged Low Interest Rates Pressure Profitability of Korean Banks"

[Asia Economy Reporter Eunbyeol Kim] Credit rating agency Moody's has assessed that the prolonged low interest rate environment could pressure the profitability of domestic banks.

Sean Ro, a Moody's analyst, stated in a report on the 25th, "The Bank of Korea is expected to maintain an accommodative monetary policy to support the early-stage economic recovery, resulting in a continued low interest rate environment," adding, "This will pressure banks' net interest margins and profitability."

He also predicted that under such conditions, banks will accelerate digital transformation and expand overseas operations to seek new growth opportunities.

However, the report noted that while digital transformation, involving reducing offline branches and expanding online platforms, can improve efficiency, it also increases risks related to security and personal data protection.

It pointed out that overseas market expansion could also increase asset risk and operational risk.

Meanwhile, Moody's stated, "The Bank of Korea lowered the base interest rate to 0.50% this year in response to the spread of the novel coronavirus (COVID-19)," and forecasted that "considering the slow economic recovery and low inflation, Korea's low interest rate environment will continue for a considerable period after next year." The Bank of Korea will decide the base interest rate for the last time this year on the 26th.

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