Banks Unable to Smile Despite Record Performance... Uneasy Over 'Populism Invoice' (Comprehensive)

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 healthy growth in loan assets, a rebound in net interest margin (NIM), strong performance by non-bank affiliates, and a reduction in one-off factors. KB Financial posted a net profit of 1.2701 trillion won, up 74.1% from a year earlier. 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 surprise performance in the first quarter, we cannot be entirely happy as financial authorities and the political sphere are demanding various funding contributions under the pretext of COVID-19. We are only fearful about how much and what kind of pressure will be applied using this good performance as leverage."

An executive at Financial Holding Company B expressed concern, saying, "It is true that profits increased significantly in the first quarter, but I worry that 'political finance' aimed at buying votes with financial company money will become rampant. Looking at the bills recently passed in the political sphere, many contain provisions that go against market principles, which is perplexing."

Even 'Bank Debt Forgiveness Law'... Excessive Financial Populism

Banks have already taken on responsibilities such as extending maturity and interest payment deferrals due to COVID-19 until September, establishing and operating bond market stabilization funds and securities market stabilization funds to stabilize the securities and bond markets, and mobilizing the K-New Deal. There are also increasing demands for participation in profit-sharing schemes to replenish funds for low-income financial services.

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

The financial sector agrees that financial companies should cooperate during economic hardships but complains that the government is excessively shifting responsibilities that it should bear onto financial companies. After all, bank money ultimately belongs to shareholders and depositors, but 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, "Policies such as principal and interest reduction bills and forced fund establishment that deteriorate bank soundness will directly pass the damage onto 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 sector itself will collapse."

Political Demands Cross the Line... "Big Problem That They Don't Understand Finance"

Experts also express concern that political demands exceed the public 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 clearly a private enterprise, yet political interference is excessive. Above all, the 'bank debt forgiveness law' being pushed by the political sphere is a bill that would collapse the financial system itself." Professor Kim added, "Excessive populism is a problem, but the bigger issue is that the political sphere does not understand the financial system itself."

Professor Taeyoon Sung of Yonsei University’s Department of Economics bluntly stated, "Excessive political intervention in finance shakes the market economy order and can cause dysfunction in autonomy." Professor Sungin Jung of Hongik University’s Department of Economics criticized, "The political sphere itself must abandon the desire to use finance as a tool of politics."

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