[1mm Financial Talk] They Said to Check Loans, Now Pressuring for 'Slave Labor'... Banks in a Tangled Step

The steps of commercial banks are twisting like a zigzag (之). Until recently, financial authorities had ordered measures to address household debt issues, including raising loan interest rates, but just within a month after the Seoul Gangseo District Mayor re-election, pressure related to 'Coexistence Finance Season 2' has been increasing again.

On the 23rd, as domestic market interest rates and bank loan interest rates rapidly rise, a banner displaying loan interest rates is hung on the exterior wall of a commercial bank in Seoul. Photo by Jinhyung Kang aymsdream@

According to the financial sector on the 7th, Kim Joo-hyun, Chairman of the Financial Services Commission, is scheduled to hold a meeting with the heads of the five major domestic financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup) on the 16th. It is expected that President Yoon Seok-yeol, who has recently been focusing on livelihood issues, will criticize the banks for expanding interest profits, and discussions on support for small business owners and self-employed individuals, as well as the expansion of coexistence finance, will be on the agenda.

The industry appears to be bewildered by this trend. Until last month, they were ordered to manage the rapidly increasing household loans, but within just a month, pressure for coexistence finance continues. In fact, until recently, the banking sector had been focusing on managing household loans. This was because household loans have been steadily rising recently, prompting financial authorities to request management.

As a result, KB Kookmin Bank raised the interest rates on mixed (fixed) type and new balance CoFIX-based mortgage loans by 0.1 to 0.2 percentage points last month, and Shinhan Bank also increased the variable mortgage loan interest rate by 0.05% starting this month. Hana Bank and Woori Bank also adjusted their loan interest rates upward last month and this month, respectively. The '50-year maturity mortgage loan,' which once caused a sensation, has almost disappeared from the market.

However, these steps began to get complicated following President Yoon's so-called 'servant' remarks. On the 30th of last month, during a Cabinet meeting, President Yoon shared an anecdote from his visit to livelihood sites, stating, "Small business owners and self-employed people struggling with high interest rates work to death and hand over all their earnings to repay loan principal and interest, making it feel as if they are serving as servants to the banks." Then, on the 1st of this month, at a meeting with small business owners and the self-employed, he directly criticized, "Our country's banks often engage in power abuse."

From this point, financial authorities have also been reinforcing coexistence finance. Chairman Kim pressured the heads of financial associations from various sectors at a meeting the day before, saying that 'extraordinary efforts' are needed to alleviate the difficulties of self-employed and small business owners. Lee Bok-hyun, Governor of the Financial Supervisory Service, also pointed out, "(Unlike the U.S.,) the domestic banking industry structure is such that individuals who cannot fully manage risks bear the shocks from interest rate fluctuations, while banks with market analysis capabilities pass the burden onto consumers."

With these criticisms continuing, the banking sector is in a tangled situation. A representative from a commercial bank said, "Until last month, we were asked to focus on managing household loans, but within just a month, we are under pressure to propose coexistence finance plans," adding, "It seems difficult to make additional interest rate adjustments for household loan management for the time being." Meanwhile, household loans from the five major banks increased by about 3.68 trillion KRW last month, the highest in two years.

Instead, the banking sector is preparing coexistence finance plans, even sacrificing weekends. Hana Bank prepared a coexistence finance plan worth 100 billion KRW for small business owners and the self-employed on the 3rd, and Shinhan Bank followed with a 105 billion KRW plan the day before, taking preemptive action. Subsequently, KB Kookmin, Woori, NH Nonghyup, as well as commercial banks, specialized banks, and regional banks, are also preparing coexistence finance plans, sacrificing their weekends.

However, pressure related to coexistence finance is expected to continue for the time being. It is anticipated that substantial measures related to Coexistence Finance Season 2 will be discussed at the meeting between the head of financial authorities and major financial chairpersons scheduled for mid-month.

Additionally, the authorities are preparing a 'Policy for Stabilizing Financial Services for the Underprivileged,' aiming for announcement next month. To support products like Sunshine Loans and emergency living expense loans, which face difficulties in securing funding, measures such as increasing the contribution rates from banks or expanding donations are expected to be discussed. This is intended to increase contributions and donations instead of introducing a so-called 'windfall tax' proposed mainly in political circles, but in any case, the burden on banks will inevitably increase.

There are also many complaints within the banking sector. There are concerns that such pressure will intensify ahead of the general elections in April next year. A financial sector official said, "We agree on the social responsibility of banks, but even during last year's Legoland incident and the early-year coexistence finance phase, banks were not idle," adding, "We worry that this trend might negatively affect the recent expansion of household debt."

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