FSS Deputy Director Expresses Concern Over Banks' Concentration on Real Estate Loans

Byungchil Kim, Deputy Director of Banks and Small Finance at the Financial Supervisory Service,
holds a meeting with the chairpersons of 18 domestic banks' boards
"Banks should resolve the concentration of real estate-related loans and focus on productive sectors"

Byungchil Kim, Deputy Director in charge of Banks and Small Finance at the Financial Supervisory Service. Yonhap News.

Byungchil Kim, Deputy Director in charge of Banks and Small Finance at the Financial Supervisory Service, expressed concern about the concentration of real estate-related loans by domestic banks and urged them to play a more productive role.

On the morning of July 14, the Financial Supervisory Service announced that Deputy Director Kim presided over the "2025 Regular Meeting" with the chairpersons of the boards of directors from 18 domestic banks at the Bankers' Hall in Jung-gu, Seoul.

Deputy Director Kim pointed out, "The recent concentration of real estate-related loans in the banking sector hinders balanced growth of our economy and could pose risks to the financial system in the event of external shocks." According to the Financial Supervisory Service, the outstanding balance of real estate-related loans at domestic banks surged from 1,167 trillion won at the end of 2019 to 1,673 trillion won at the end of last year.

He requested, "I ask that the boards of directors review the management strategies of executives from a balanced perspective so that banks can faithfully fulfill their role as intermediaries of funds to productive sectors."

He continued, "Since the COVID-19 pandemic, the ongoing effects of high interest rates and economic slowdown have intensified the difficulties faced by vulnerable groups, including small business owners and the self-employed." He added, "The Financial Supervisory Service plans to create an inclusive financial environment to support the recovery of vulnerable groups, and I ask that banks also participate based on their social responsibility."

Regarding the bank accountability structure introduced this year, he positively evaluated the fact that roles and responsibilities within organizations have become clearer and the awareness of executives and employees has been heightened. However, he also stated, "Continuous improvements are needed in terms of infrastructure, such as manuals and IT systems, as well as in areas that have been found lacking during the implementation process after introduction." He added, "The board of directors should faithfully perform its oversight and check functions regarding whether executives are fulfilling their internal control obligations based on the accountability structure."

He also called for stronger risk management as banks expand the use of artificial intelligence (AI). Deputy Director Kim said, "It is positive that the banking sector is broadly introducing AI technology in various business areas, including internal controls." He continued, "However, as new types of risks such as bias and personal data protection may arise, the board of directors needs to pay close attention and make efforts to establish governance systems, including principles for managing and controlling these risks and clarifying roles within the organization."

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