[2024 National Audit] Lee Bok-hyun "Apologies to Banks and Consumers... Pivot Was Difficult Without Reversing Household Loan Trend" (Summary)

Lee Bok-hyun, Governor of the Financial Supervisory Service, is responding to a lawmaker's question during the National Assembly's Political Affairs Committee's audit of the Financial Supervisory Service held on the 17th. Photo by Kim Hyun-min

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Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), apologized for causing market confusion due to contradictory remarks on household loan policies and intervention in banks, while also asserting that without intervention to curb the household loan trend, a pivot would have been difficult.

At the National Assembly's Political Affairs Committee audit on the 17th, Governor Lee addressed criticisms from lawmakers regarding past statements that caused market confusion over household loan policies and administrative finance. He said, "There may be various perspectives on what role financial authorities should play when there is a surge in household debt and concentration," but he apologized once again. Regarding the criticism that the postponement of the second phase of the Debt Service Ratio (DSR) caused policy confusion, he admitted, "I believe I am responsible."

However, in response to a question that "if the governor's remarks caused bank interest rates to fluctuate, reducing predictability and becoming a cause of Korea discount," he emphasized the necessity of intervention, stating, "If the increasing trend had not been curbed at that time, recent interest rate cuts by the Monetary Policy Committee would have been difficult, and the rapid rise in real estate prices would have been hard to ease."

Governor Lee also explained, "The reason for making strong remarks about bank household loans in August was that banks failed to manage loans on their own," adding, "Household loans should originally be managed within an annual portfolio range, but banks increased loans faster and more than originally planned."

Regarding concerns that rising loan interest rates are increasing the financial burden on existing borrowers and genuine demanders, he responded, "It has been analyzed that a 25 basis point (0.25 percentage point) cut in the base interest rate would result in a substantial reduction in interest burden amounting to hundreds of billions or even trillions of won for many borrowers starting one or two months later."

In response to a lawmaker's question about whether expanding the evaluation grades for real estate project financing (PF) might cause adverse effects such as continued defaults, he emphasized, "I understood it completely the opposite. Since the evaluation was at three stages, there was an ambiguous aspect of deferring defaults. By dividing the evaluation into multiple stages and making the criteria stricter, normalization would not have been possible without expanding the evaluation grades."

There were also criticisms that the governor's strong remarks toward financial companies, including pressuring the management of Woori Financial Group recently, were "overstepping authority." To a question asking, "There are talks that you are playing the media with a view to entering politics. Do you have political ambitions?" he replied, "This is my third audit, and I have continuously said I have no plans to enter politics. Please believe me now."

Questions about the refund delay incident involving Timf (Timon and Wemakeprice) also followed. Regarding the whereabouts of Timon's separate deposit of 20 billion won, Governor Lee said, "It has been confirmed that Timon misappropriated the 20 billion won deposit," adding, "We are cooperating with the prosecution in the investigation."

Regarding the statement from the Electronic Payment Gateway (PG) Association, which received an opinion letter from a law firm stating that although the Timf default incident has increased difficulties in consumer refunds, PG companies bear no refund responsibility, he dismissed it, saying, "It is content that law firms can interpret in various ways."

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