Yoon Criticizes 'Money Party,' Banks Offer 10 Trillion+ Alpha (Comprehensive)

Criticism of State-Controlled Finance
Bank Federation Chairman: "Banks Are Not Welfare Providers"

[Asia Economy Reporter Kwon Hyun-ji] The banking sector has unveiled a blueprint to support vulnerable groups with "10 trillion won+?" over the next three years. This comes amid President Yoon Seok-yeol and others repeatedly pointing out the issue of excessive interest income in the banking sector. While there are calls for banks to expand social contributions in proportion to the benefits they have enjoyed from high interest rates, some criticize this as a case of "seeking favor by being poked in the side," given that financial institutions are clearly private companies.

Kim Kwang-soo, Chairman of the Korea Federation of Banks, is speaking at the meeting between the Financial Services Commission Chairman and bank presidents held at the Bankers' Hall in Jung-gu, Seoul on the 9th. Photo by Kim Hyun-min kimhyun81@

According to the financial sector on the 15th, the Korea Federation of Banks announced that it will promote a "Banking Sector Social Contribution Project" containing such content. This is a follow-up measure to the decision made at the 13th Emergency Livelihood Economy Meeting held the same day to promote support for vulnerable groups through voluntary contributions from the banking sector as a financial sector countermeasure.

Accordingly, the banking sector plans to support more than 10 trillion won over three years through measures such as support for low-income and low-credit individuals using joint social contribution funds (3 trillion won), additional contributions for special guarantees for financially excluded small and medium enterprises (3 trillion won), and expansion of other banking sector financial products for ordinary citizens (4 trillion won).

Kim Kwang-soo, chairman of the Korea Federation of Banks, said at a press conference at the Bankers' Hall in Jung-gu, Seoul, "Internally, we thought the banking sector was relatively diligent in social contribution projects, but the external perspective is quite different and there are parts we missed," adding, "We considered what measures could be more helpful to vulnerable groups rather than simple fund contributions."

The banking sector's swift move comes amid increasing government pressure on banks that recorded net profits exceeding 16 trillion won last year. In particular, while borrowers' interest burdens have greatly increased due to the recent rapid interest rate hikes, issues such as high bonuses and voluntary retirement payments in the financial sector have been highlighted, leading to unfavorable public views of the banking sector.

[Image source=Yonhap News]

President Yoon pressured on the 13th, saying, "Banks have a public utility nature, so please ensure that profits return as win-win financial benefits to struggling citizens, self-employed people, and small business owners," and at the Emergency Economic Livelihood Meeting on the same day, he urged, "Please voluntarily participate in sharing the pain."

In response, Lee Bok-hyun, governor of the Financial Supervisory Service, said, "In a situation where the difficulties of the people are increasing due to high interest rates and economic slowdown, the banking sector pays huge bonuses based on record-high interest income, but efforts to coexist with the people are insufficient," adding, "Rather than superficial efforts, more substantial and tangible bold support is needed."

Along with this, the authorities plan to form a "Banking Sector Management, Business Practices, and System Improvement Task Force (TF)" this month, involving the Financial Services Commission, Financial Supervisory Service, banking sector, academia, legal circles, and consumer experts, to undertake fundamental structural reforms.

The TF will discuss major tasks such as structural improvement measures to promote competition in the banking sector, compensation systems including bonuses and retirement pay, enhancing loss absorption capacity, expanding the proportion of non-interest income, improving the interest rate system including increasing the proportion of fixed interest rates, and revitalizing social contributions. The government plans to form and launch the TF this month and, after discussions, derive institutional improvement measures in the first half of the year.

However, some in the financial sector complain that such pressure is excessive. Since the compensation system is based on labor-management negotiations, it is difficult to interpret it solely as moral hazard on the part of banks, and social contribution activities are also management decisions of private companies. Some interpret this as a political intention aimed at votes ahead of next year's general election.

A financial sector official said, "The banking sector has already actively cooperated with government policies during the complex crisis recovery process such as the Legoland incident last year and has been implementing its own social return measures since the beginning of the year," adding, "Isn't this a situation where we have nothing to say even if criticized as government control?"

Kim Kwang-soo, chairman of the Korea Federation of Banks, also told reporters, "We will accept external opinions as a way to reflect on how sincere we are in social contribution projects," but added, "Banks are not welfare. We are thinking a lot about how to use the principles of business operations to do better."

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