Gov’t should butt out of banking

The Financial Supervisory Service plans to set guidelines on various fees banks charge customers to “rationalize” the rates. It plans to allow increases if studies show they are necessary, implying that “rationalization” may amount to nothing more than a euphemism for higher fees.

Bank customers are angrily responding to the announcement that quickly followed a comment by Choi Soo-hyun, governor of the FSS. He recently said bank revenues and profits have been halved and suggested that various fees in the financial sector need to be rationalized in order to boost banks’ revenue base. He hinted that banks could be allowed to raise service charges in order to compensate for losses.

We like to point out that the reason and method for the FSS allowing higher financial service charges is all wrong. First of all, revenue losses should not be mitigated through higher fees charged to customers. Banks are losing revenue and profits because of changes in the financial environment. Worldwide interest rate cuts and increasing corporate insolvencies, among other things, have cut into revenue for banks. Increased intervention, regulations, and pressure from the government and financial authorities to ease and increase lending to working-class people and small and midsize companies is also eating into profits.

In response to the worsening corporate environment, institutions should restructure to reduce unnecessary expenses, manpower and outlets, and rationalize management to cut costs. Banks should not take the easy way out simply passing the buck to consumers instead of tackling meaningful restructuring.

It also doesn’t look good for the regulator to publicly pave the way for banks to raise their service fees because of profitability concerns. The FSS’s primary role is to maintain and supervise financial integrity and protect consumers, not demand sacrifice from ordinary people to shore up profits for banks. In the last administration, the FSS arm-twisted banks to lower service fees. If it wants to make amends, it would be best to minimize interference in bank management. It is more bureaucratic excess to offer to help improve bank profits.