Banks Show Reluctance Amid Political Backlash Over "Monopoly Abuse"

President Yoon Suk-yeol Photo by Yonhap News

[Asia Economy Reporter Bu Aeri] Since President Yoon Seok-yeol's remark that "banks are public goods," political attacks on the banking sector have continued. While bills have been proposed by the ruling party, related statements have been pouring out daily, leaving the banking sector full of concerns.

According to the financial sector on the 18th, a bill to codify the public nature of banks was proposed on the 16th, mainly by ruling party lawmakers. 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 contribute to the development of the national economy by securing the public nature of banks," thereby explicitly stating "public nature" in the Banking Act.

This goes a step further than President Yoon's earlier remarks referring to the public good nature of banks. Previously, on the 13th, at a senior secretaries' meeting, President Yoon stated, "Since banks have the nature of public goods, profits should be considered to return as win-win financial benefits to the vulnerable citizens, self-employed, and small business owners."

Beyond the bill proposal, the political sphere has seen both ruling and opposition parties unite in making daily remarks targeting the banking sector. Jeong Jin-seok, Emergency Committee Chairman of the People Power Party, said the day before, "It is difficult to leave the monopolistic tyranny and profits of banks as they are," and pressured, "Banks must fulfill their social role sufficiently so that win-win financial benefits can reach vulnerable citizens, self-employed, and small business owners." Park Hong-geun, floor leader of the Democratic Party of Korea, also criticized, "While high interest rates deepen the worries of ordinary people, banks are holding performance bonus feasts and retirement allowance parties."

The financial authorities have also announced plans to address the 'oligopoly system' centered on the five major commercial banks. The Financial Services Commission plans to begin discussions on fundamental structural reforms this month through the 'Banking Sector Management, Business Practices, and System Improvement Task Force (TF).'

Discussions are expected to cover promoting competition in the banking sector, compensation systems including performance bonuses and retirement allowances, expanding the proportion of non-interest income, enhancing loss absorption capacity, and activating social contribution activities.

Banks are unable to hide their embarrassment. Since last year, in response to requests from financial authorities amid rapid interest rate hikes, they have disclosed the loan-deposit interest rate spread, proactively lowered loan interest rates, waived various fees, and even supplied liquidity amounting to 95 trillion won during bond market tightening phases. Yet, they are being treated daily as "loan sharks." A representative from a commercial bank said, "Banks are companies too, and I don't understand why receiving performance bonuses and retirement allowances according to labor-management agreed rules from the profits generated is being criticized to this extent."

The banking sector announced it will again promote social contribution projects worth over 10 trillion won over three years, but public opinion remains cold. A senior official from the financial authorities said, "Looking at the measures proposed by the banking sector this time, they have a guarantee multiplier effect, so it is unclear how much practical help they will provide," adding, "The responses from the banking sector need to feel more realistic, but there is a frustrating aspect to this."

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