[The Editors' Verdict] Should We Be Satisfied With Avoiding the 'Worst' Bank Windfall Tax?

It is confusing. President Yoon Seok-yeol has emphasized freedom and market economy whenever he had the chance. Freedom and market economy are also the true values of conservatism. However, the Yoon Seok-yeol administration is going against freedom and the market economy.

The government is effectively intervening in the market under the pretext of price stabilization, tightening its grip on companies. In particular, vice ministers from various ministries continue to summon business representatives in the form of sector-specific meetings with the food, fisheries, and catering industries to exert pressure.

In the financial sector, the government called the chairpersons of the eight major financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup, BNK, DGB, JB) to a meeting to propose win-win financial measures. Financial Services Commission Chairman Kim Joo-hyun said at a briefing after the meeting on the 20th, “There are many people struggling, but aren’t self-employed and small business owners the groups our society should care about first?” thereby designating the targets for win-win finance.

When asked about the Democratic Party’s 'windfall tax' bill, Chairman Kim responded, “I think it is possible to handle detailed matters through discussions between the industry and authorities rather than through legislation.” Regarding the question that “there are projections that the windfall tax could amount to 2 trillion won,” he said, “There was no discussion on the specific amount today,” but added, “I believe financial holding companies are aware of the scale the National Assembly expects for the windfall tax.” This is tantamount to setting the win-win finance scale at around 2 trillion won.

People are suffering from high inflation and high interest rates. The situation for self-employed and small business owners is difficult, and public resentment toward banks is high. Net profits have increased significantly in this high-interest era through easy interest business, but this is based on the interest paid painfully by households and companies. Banks throw lavish bonuses with the increased net profits. This is the public sentiment.

Koreans have high expectations of the government. Whenever a problem arises, they ask, “What is the government doing?” or “Where is the president?” This may be due to the legacy of the developmental dictatorship era or the national characteristic represented by “ppalli-ppalli” (hurry-hurry).

Realistic views are expressed such as, “Honestly, which country in the world truly practices a proper market economy? Only the United States can do so; European countries also intervene in the market to varying degrees,” and “While noble ideals (freedom and market economy) should be upheld as overarching principles, shouldn’t we implement policies that help the people according to the circumstances on the ground?” There are also populist claims like, “If the majority of the people want it, shouldn’t banks be allowed to play such a role even if there are side effects?”

As the government prevents companies from raising product prices, phenomena such as shrinkflation (reducing quantity while selling at the same price), skimflation (lowering quality while selling at the same price), and bundleflation (selling bundled products at a higher price than individual items) have appeared.

If the government intervenes to make banks provide win-win finance, it is difficult to predict what problems and side effects may arise. Foreign investors might view this situation negatively and see Korea as an unattractive investment destination. Could such government measures lower banks’ credit ratings and increase their funding costs?

According to the Financial Services Commission, this may cause fewer side effects than the 'windfall tax,' so there might be no major problems. However, unforeseen problems and side effects could emerge from unexpected areas.

Since the Financial Services Commission says it will not impose the 'worst' windfall tax, should we be satisfied with the 'lesser evil' pressure for win-win finance?

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