"Banking as a Public Good" Bill Introduced... Emphasizing 'Social Responsibility' Despite 10 Trillion Won Return

To Make Matters Worse, "Legislation on Bank Publicness"

[Asia Economy Reporters Jehoon Yoo and Aeri Boo] Since President Yoon Seok-yeol's remark that "banks are public goods," the intensity of attacks on the banking sector has been increasing. While the ruling party is attempting to amend the Banking Act to codify the president's statement, the banking sector is clearly anxious despite offering 'social contributions of 10 trillion won plus alpha.'

According to the financial sector on the 17th, a bill to codify the public nature of banks was proposed yesterday, mainly by ruling party members of the National Assembly's Political Affairs Committee. The bill aims to amend Article 1 (Purpose) of the Banking Act to read, "The purpose is to pursue the stability of the financial market and secure the public nature of banks to contribute to the development of the national economy," thereby explicitly stating the "public nature" in the Banking Act.

Kim Hee-gon, a member of the People Power Party who sponsored the bill, said, "By explicitly stating the public nature of banks in the current law's purpose, it clarifies the orientation toward banks' public interest activities and encourages banks to fulfill social responsibilities and expand public interest activities, thereby promoting integrated national economic development."

On the 13th, President Yoon mentioned at a senior secretaries' meeting, "Since banks have the nature of public goods, profits should be considered to return as win-win financial benefits to vulnerable citizens, self-employed individuals, and small business owners." This is seen as a step further from President Yoon's previous remarks on the public goods nature of banks.

Depending on the outcome of this bill, the controversy over whether "banks are public goods or not" is expected to come to an end. If the bill passes, it will clarify the orientation toward banks' public interest activities and provide a foundation for bank managers, who are responsible for profit-seeking and maximizing shareholder interests, to bear public obligations and expand social responsibilities, according to Kim's office.

The political pressure on the banking sector is not limited to the Political Affairs Committee. On the previous day, Chung Jin-seok, the emergency committee chairman of the People Power Party, said, "It is difficult to leave the monopolistic arrogance and profits of banks as they are," and pressured, "Banks must fulfill their social roles sufficiently so that win-win financial benefits can reach vulnerable citizens, self-employed individuals, and small business owners."

Earlier, Park Hong-geun, the floor leader of the Democratic Party of Korea, also raised his voice, saying, "While high interest rates deepen the worries of ordinary people, banks are holding bonus parties and retirement allowance celebrations." The ruling and opposition parties, who are often at odds over various political issues, are united in their stance on the banking issue.

As the banking sector has become a "public enemy," it is clearly anxious despite presenting social return measures amounting to "10 trillion won plus alpha." Under pressure from the political sphere and authorities, the social contribution amount, initially set at 500 billion won on the 27th of last month, was increased to 780 billion won within just two days, and including support through guarantee multiples, it has exceeded 10 trillion won. However, favorable views remain scarce.

The banking sector also has much to say. Since last year, in response to the financial authorities' requests amid soaring interest rates, banks have disclosed the interest rate spread between deposits and loans, proactively lowered loan interest rates, waived various fees, and even supplied liquidity amounting to 95 trillion won during bond market tightening phases. Yet, they have been criticized as "interest profiteers." The bonus issue, which sparked the controversy, is a matter requiring labor-management consultation, and the retirement allowance issue is seen as a workforce restructuring suitable for the digital transition period, so it cannot be viewed solely as "moral hazard."

A financial sector official said, "Due to the government's COVID-19 interest deferral and maturity extension measures targeting small business owners and the self-employed, there is an optical illusion regarding the non-performing loan ratio of related loans in the banking sector, so recent profits should be seen as reflecting future losses in advance," adding, "While restraint on dividends and increased provisions are necessary, shouldn't these overall circumstances also be considered?"

Especially for the financial sector, the fact that the offensive is spreading to the political sphere ahead of next year's general election is also a burden. A commercial bank official said, "Although the proportion of social returns relative to net profit is only 5-6%, general companies are at 3-4%, and global financial firms, which are the main comparison targets, are around 1%. It is questionable whether this can be called 'only' that much," adding, "It seems there is no distinction between ruling and opposition parties when it comes to attacking the financial sector."

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