The Democratic Party urges financial sector to share pain... "Request to shorten quarterly loan-deposit interest rate gap disclosure to monthly" (Comprehensive)

4th Meeting of the Price and Livelihood Special Committee
Measures to Reduce Borrower Burden During Interest Rate Hikes
Plans to Enhance Transparency of Bank Loan-Deposit Margins
Indicates Fiscal Spending Cuts Amid Inflation Concerns

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Hyun-ji] The People Power Party has requested financial authorities to change the disclosure period and method of the interest rate spread between deposits and loans in order to reduce the interest burden on financially vulnerable groups amid high inflation and high interest rates.

Ryu Seong-geol, chairman of the People Power Party's Special Committee on Price and Livelihood Stability, said in a press briefing after the 4th meeting held on the 28th at the National Assembly in Yeouido, Seoul, “We have requested the Financial Services Commission and the Financial Supervisory Service to disclose the interest rate spread by bank, which is currently disclosed quarterly, on a monthly basis or to shorten the disclosure period and disclose it in an integrated manner.” The purpose is to increase transparency in banks' deposit-loan margin operations and reduce the burden on vulnerable borrowers during the interest rate hike period.

In addition, Representative Ryu said, “We have urged the Financial Supervisory Service and the Financial Services Commission to promote measures to improve the rationality of the calculation and operation of loan additional interest rates and to report on the situation.”

This measure is interpreted as a call for shared pain in the financial sector following criticism that banks are earning enormous interest profits. Seong Il-jong, chairman of the Policy Committee, also attended the meeting that day and requested direct cooperation from the financial industry. Chairman Seong said, “Even in the economic crisis situation, the five major financial groups achieved a record high profit of 11.3 trillion won in the first quarter,” and added, “I earnestly ask for voluntary participation to prevent one-sided concentration on the deposit-loan margin. Please discuss whether those who are borrowing are bearing too much interest and whether they are adapting well and cooperating in the crisis.”

Representative Ryu also said, “The interest rate hike is a difficulty for financially vulnerable borrowers,” and “We need to take practical measures to reduce the burden even a little.”

The special committee also requested the Financial Supervisory Service to extend the sale of products such as interest rate cap-type mortgage loans to secure consumer choice and to apply the ‘new balance-based COFIX (Cost of Funds Index).’ They also asked the Financial Services Commission to prepare support measures for small business owners who have declared ‘pre-workout (pre-debt adjustment)’ through consultation with the Credit Recovery Committee.

They also hinted at the possibility of reducing fiscal spending due to concerns about rising prices. Representative Ryu said about COVID-19 related support funds, “The budget has already been reflected, so the budget will be executed as reflected,” but added, “For fiscal efficiency, it is desirable to reduce fiscal spending gradually, which can reduce overall fiscal demand to some extent. This is desirable both from the perspective of demand management and fiscal soundness.”

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