Trial and Error with the Financial Consumer Protection Act... Eun Seong-su Requests Cooperation from Bank Presidents (Comprehensive)

Broad Discussion on Current Issues Including Support for Small Business Owners, Household Debt Management, and Real Estate Speculation Prevention

Eun Sung-soo, Chairman of the Financial Services Commission, is delivering opening remarks at the Commercial Bank CEOs Meeting held at the Bankers Association Building in Myeong-dong, Jung-gu, Seoul, on the morning of the 1st.

[Asia Economy Reporters Park Sun-mi and Song Seung-seop] Amid a pile-up of pressing issues in the banking industry such as the enforcement of the Financial Consumer Protection Act (FCPA), extension of loan maturities for small business owners, and eradication of real estate speculation, Eun Sung-soo, Chairman of the Financial Services Commission, convened major bank CEOs on the 1st. This came just a month and a half after a series of private meetings with the heads of the five major financial holding companies and policy banks in February to discuss the extension of loan maturities and interest repayment deferrals in the financial sector.

Active and Tumultuous Discussions on the FCPA

According to the financial sector, Chairman Eun met at 10 a.m. in the Korea Federation of Banks meeting room with the CEOs of Kookmin, Shinhan, Woori, Hana, SC First Bank, and Industrial Bank of Korea, as well as deputy CEOs from Nonghyup and Jeonbuk Bank, and a deputy vice president from Busan Bank. The purpose was to request active cooperation from bank CEOs for the smooth implementation of the FCPA and to discuss key issues such as the extension and smooth transition plans for loan maturity extensions and interest repayment deferrals for small business owners and SMEs, contributions to funds for low-income financial support, and measures to prevent real estate speculation, which take effect from that day.

At the meeting, Chairman Eun expressed regret over the burden on bank tellers and the confusion and inconvenience at the frontline on the day the FCPA was enforced, saying, "It is unfortunate and regrettable." However, he added, "The concepts of 'speedy service' and 'consumer protection' are difficult to reconcile." He continued, "Although it may be burdensome now, if consumer protection is properly implemented on the ground, it will have the effect of preventing heavy responsibilities such as CEO sanctions in the future. Let us take this opportunity to completely change the previous financial product sales practices and consider ways to firmly establish the FCPA."

He cited an example where a credit card company informed customers via messages about changes due to the FCPA, which received a positive response, and suggested, "It would be good if the banking sector made similar efforts." Currently, the financial authorities are operating a rapid response system for difficulties related to the FCPA in cooperation with financial industry associations, demonstrating their determination to provide swift and active support for the law’s establishment.

Major bank CEOs voiced their difficulties and complaints regarding the enforcement of the FCPA to Chairman Eun. One CEO mentioned that the restriction on fund subscriptions for one month before and after a loan could actually harm consumers. Chairman Eun told reporters after the meeting, "One CEO mentioned that the restriction on tied selling could harm consumers who want to take out loans and subscribe to funds simultaneously," adding, "We said it is allowed within 1%, but we will consider whether this is practically feasible."

He added, "Although the financial authorities created the law, we do not know everything about the frontline," and said, "If you inform us about what happens at the counters during the six-month period, we will try to improve and stabilize it. Although the law was made to protect consumers, causing inconvenience to consumers is problematic, so we will consider ways to shorten the time involved."

[Image source=Yonhap News]

Broad Discussions on Support for Small Business Owners, Household Debt Management, and Real Estate Speculation Prevention

Regarding the loan maturity extension measures for small business owners and SMEs that take effect from that day, Chairman Eun also urged major bank CEOs, "Please pay special attention to providing borrower-tailored consulting at the counters and ensuring that the decision on support eligibility does not take excessive time."

He also announced that a household debt management plan would be unveiled in April and requested, "Please work together to ensure the swift implementation of the household debt management measures." On the possibility of easing household loan regulations for young people and the homeless, he explained, "There is a consensus that household loans must be stabilized because they can become a bomb later, but if the Debt Service Ratio (DSR) regulation is tightened, young people with no income will face a loan gap," explaining the background for considering easing the Loan-to-Value (LTV) ratio for young people and the homeless who face difficulties in housing stability.

Regarding the amendment to the Low-Income Financial Act to be implemented in the second half of the year, he emphasized that "banks also benefit." He said, "With funds jointly contributed by the financial sector and the government, banks will receive guarantee benefits and be able to provide loans (Sunshine Loan Bank) to low-credit groups. Please understand that banks will also benefit from this." He stressed to the bank CEOs that banks cannot be detached from South Korea’s financial system, explaining, "If low-income financial supply had not been provided last year, banks could have borne the resulting losses. Banks must actively cooperate in supplying low-income financial services."

He also requested efforts from the banking sector to prevent real estate speculation. He said, "It is important for the counters to make self-regulatory efforts to ensure sound lending, and there must be no connection between speculative real estate investors and bank employees," adding, "Especially, loans related to speculators who are obligated to dispose of farmland should be promptly recalled."

Regarding the proposal by Lee Nak-yeon, Co-Chairman of the Democratic Party’s Standing Joint Election Committee, for a ‘50-year maturity mortgage loan national guarantee system’ to help young and newlywed generations purchase their first home in life, Chairman Eun responded positively. He said, "The longer the mortgage period, the lower the amount paid," adding, "We are currently preparing to introduce a 40-year mortgage, and the 50-year mortgage proposal made the day before was probably intended to suggest that a longer period would be better to reduce the burden on young people."

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