Lee Bok-hyun "No Consensus with Authorities on Loan Restrictions for Homeowners in the Financial Sector"

Lee Bok-hyun, Governor of the Financial Supervisory Service, is attending and speaking at the on-site meeting for household loan borrowers and experts held at KB Kookmin Bank in Yeouido, Seoul on the 4th. Photo by Jo Yong-jun jun21@

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On the 4th, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), recently commented on the suspension of mortgage loans primarily by some banks and insurance companies for homeowners, stating, "There is no consensus with the authorities, and it is doubtful whether it will be effective," adding, "I will meet with bank presidents before Chuseok to discuss this."

After concluding the 'On-site Meeting with Household Loan Actual Demanders and Experts' held at the new building of KB Kookmin Bank in Yeouido, Seoul, Governor Lee told reporters, "Even homeowners with one house may need to prepare jeonse deposits for their children attending university in provincial areas, so there are practical needs for living," and said, "There may be situations that are not for speculative purposes, so I am not sure if a blanket ban would be effective."

Until now, the FSS had not taken a particular stance on loan management policies individually introduced by some banks. However, as some financial companies introduced restrictions on loans for homeowners, raising concerns about potential harm to actual demanders, the FSS stepped in. Governor Lee explained, "It is appropriate for the FSS not to comment on loan interest rates or product suitability, but given the current situation, I think communication is necessary."

According to the FSS, household loans in the banking sector increased by about 9.5 trillion won last month. The manageable level anticipated by the authorities was about 5.5 trillion won. Governor Lee assessed, "At this level, it is difficult to manage compared to GDP growth rate," and diagnosed, "The current household debt situation is such that even if banks raise interest rates by about 0.5 to 1 percentage point, it cannot suppress the willingness to borrow."

Regarding the 'balloon effect,' where loan demand shifts to non-bank financial companies, he said, "Based on leading indicators, it has not materialized to a worrying extent," and explained, "We are monitoring insurance companies and small and medium financial companies daily and will communicate with other sectors as well."

On the allegations of improper loans at Woori Financial Group, he once again emphasized that the current management cannot avoid responsibility. Governor Lee stated, "Whether the sanctions are legal or not, the recent management is responsible," and pointed out, "We need to see whether there was a will to root out the problem based on the current response, and whether a culture of dividing profits was rampant." He stressed, "Regular inspections will be expedited to the best of our ability," adding, "This is not just a problem of Woori Financial Group, but from the perspective of credit soundness, we need to see whether financial holding companies in Korea, such as KB Financial Group, are managing appropriately."

He also criticized the lack of communication with the authorities regarding Woori Financial Group's recent decision at an extraordinary board meeting to acquire Dongyang and ABL Life Insurance. He pointed out, "While it may be positive in terms of business expansion, there are clear risks related to portfolio expansion. Despite this being a large deal, I only knew they were reviewing the acquisition, and I found out the contract was finalized through the newspapers."

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