Top-Performing Financial Firms Uneasy Over 'Populism Invoice'

Top 4 Financial Holding Companies Post Record 1Q Earnings... Fear Political Pressure
"Excessive Financial Intervention Undermines Market Economy and Causes Autonomy Dysfunction"

[Asia Economy Reporter Kwangho Lee] Although financial holding companies recorded their highest-ever earnings in the first quarter of this year, they remain uneasy and restless. This is because the political sphere is increasingly likely to use this as an excuse to demand another ‘populist bill’.

According to the financial sector on the 26th, the four major financial holding companies?KB, Shinhan, Hana, and Woori?achieved record-breaking earnings in the first quarter. This was due to a combination of factors including a rebound in net interest margin (NIM) amid healthy growth in loan assets, strong performance by non-bank affiliates, and a reduction in one-off factors. KB Financial posted a net income of 1.2701 trillion won, up 74.1% from a year ago. Shinhan Financial (1.1919 trillion won), Hana Financial (834.4 billion won), and Woori Financial (671.6 billion won) also delivered remarkable results.

A senior official at Financial Holding Company A said, "Although we recorded a first-quarter surprise (unexpected earnings), we cannot be entirely happy as financial authorities and the political sphere are pressuring us to contribute various funds under the pretext of COVID-19. We are only fearful about how much and what kind of pressure will be applied using these good results as leverage."

An executive at Financial Holding Company B expressed concern, saying, "It is true that the profit margin widened in the first quarter, but I worry that ‘political finance’ aimed at buying votes with financial companies’ money will become rampant. Looking at the bills recently passed in the political sphere, many contain provisions that go against market principles, which is disconcerting."

Currently, banks have already taken on responsibilities such as extending maturities and deferring interest payments due to COVID-19, establishing funds to stabilize the securities and bond markets, and mobilizing the K-New Deal. There are also strong demands for participation in profit-sharing schemes to replenish funds for low-income financial services.

Additionally, excessive legislative bills are being pushed forward, including partial amendments to the Banking Act that would effectively obligate financial companies to forgive debts if the income of self-employed individuals or workers decreases due to disasters, and amendments to the Real Estate Transaction Reporting Act that require financial companies to compulsorily report suspicious speculative transactions to the Real Estate Transaction Analysis Institute when making land-secured loans.

The financial sector agrees that financial companies should cooperate during economic hardships but complains that the government excessively shifts responsibilities that it should bear onto financial companies. After all, bank money ultimately belongs to shareholders and depositors, yet the ruling party is recklessly using it.

A financial sector official pointed out, "Compared to recent political finance, past government-controlled finance was mild," adding, "Bills for principal and interest reduction and forced fund creation policies that deteriorate bank soundness will directly harm individual customers."

Another official raised their voice, saying, "There are also statements from the political sphere that go against market logic, such as reducing the interest rate spread and lowering loan interest rates. If interest rate cuts materialize due to political demands, the trust in the banking industry itself will collapse."

Experts also express concern that political demands are exceeding the public interest role of banks and the scope of regulation.

Professor Sangbong Kim of Hansung University’s Department of Economics said, "Even though finance is a regulated industry, it is still a private enterprise, and political interference is excessive. Above all, the ‘bank debt forgiveness law’ being promoted by the political sphere is a bill that would collapse the financial system itself."

Professor Taeyoon Sung of Yonsei University’s Department of Economics bluntly stated, "Excessive political intervention in finance shakes the order of the market economy and can cause dysfunction in autonomy."

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