Criticism of "Commercial Banks' Excessive Profits"... Lee Chang-yong Says "Government Supervision of Loan-Deposit Interest Rates Is Natural"

[Image source=Yonhap News]

Lee Chang-yong, Governor of the Bank of Korea, stated that it is natural for the government to supervise commercial banks, which are posting huge profits amid the interest rate hike period, and emphasized that efforts should be made to structurally convert variable interest rates to fixed interest rates.

Governor Lee made these remarks on the 21st during a briefing to the National Assembly's Planning and Finance Committee in response to Lee Soo-jin, a member of the Democratic Party of Korea, who pointed out that "the five major commercial banks are earning enormous profits, causing public outrage."

Governor Lee said, "In principle, banks are regulated industries, licensed by the government, and have an oligopolistic nature," adding, "It is natural for the government to supervise and manage so that the loan-deposit interest rate spread does not exceed an appropriate level due to excessive monopolistic power."

He continued, "One reason why the loan-deposit interest rate spread is rising now is the lack of competition, but it is also because the proportion of variable interest rates is higher than in other countries," emphasizing, "This pattern is repeating in a rising interest rate environment, so structurally, efforts to convert variable rate loans to fixed rate loans are also necessary."

In fact, although the Bank of Korea's successive base rate hikes have increased difficulties for ordinary citizens, commercial banks are reportedly making huge profits through interest margin business. The net profit of the five major financial holding companies exceeded 18 trillion won last year.

In response, financial authorities strongly criticized the unprecedented profits and bonus "money feast" by banks using the loan-deposit interest rate spread, and decided to launch a task force (TF) to discuss ways to promote competition in the financial sector and structural improvement measures, aiming to prepare institutional reform plans.

However, when asked about the Bank of Korea's role in supervising banks' loan-deposit interest rates, Governor Lee cautiously replied, "The entities that directly manage the loan-deposit ratio are the Financial Services Commission and the Financial Supervisory Service."

Yoon Young-seok, chairman of the Planning and Finance Committee, said on the same day, "It is a social problem that commercial banks are making excessive profits through loan-deposit margins during the period when the Bank of Korea is raising interest rates," and urged, "Governor Lee responded as if there are no special measures, but please take this seriously, and the Bank of Korea should exercise strong policy measures against commercial banks that do not fulfill their social responsibilities."

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