[Column] 'Lower Interest Rates' - The Excesses of 'Political Finance'

[Asia Economy Reporter Kwangho Lee] As the presidential election approaches, the level of 'political finance' is going beyond limits. Under the pretext of overcoming COVID-19, the political sphere is pressuring the financial sector by flooding it with market interventions and populist bills. Financial authorities appear to be dragged along, conscious of public opinion.

On the 2nd, Democratic Party lawmaker No Woong-rae compared financial institutions to 'corrupt officials' on Facebook and wrote that the government should strongly demand commercial banks to lower loan interest rates. Lawmaker No strongly criticized, "At this time when everyone is enduring hardship, only financial institutions are making record profits and fattening their pockets." This is interpreted as an intention by the political sphere to mobilize the government to intervene in the private banks' interest rate decision process.

This is not the first time Lawmaker No has intervened in interest rates. In April last year, he also stated that bank loan interest rates should be lowered by 1 percentage point as a measure of sharing pain.

It is also true that critical public opinion is dominant regarding the current bank deposit-loan margin profits. Especially, as Lawmaker No claims that the cause of the interest rate surge is the additional interest rates banks are charging rather than the base rate hike, there is strong criticism of excessive deposit-loan margins. In reality, while deposit interest rates remain around 1%, loan interest rates have reached 4-5%, making the deposit-loan margin as high as 2.19 percentage points. This figure is much higher than before the COVID-19 situation.

The fact that financial authorities have shifted their stance from 'an area of autonomy' to a policy of market intervention is largely due to the emergence of responsibility issues following negative public opinion.

There is sympathy for efforts to help small business owners and self-employed people struggling due to COVID-19. However, excessive political intervention in the financial market shakes the foundation of the financial market and can cause greater confusion. The duty of politicians is to correct problems in market mechanisms. Measures created by twisting the arms of financial companies under pressure from the political sphere and public opinion cannot be fundamental solutions.

Finance is like the lifeblood of the economy. Finance should not be approached with political logic rather than market logic, nor should interest rates be seen as a means to gain votes. If the political sphere applies pressure, the market is distorted, and the damage ultimately returns to the people.

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