FSC head tells banks to be kinderFinancial Services Commission Chairman Choi Jong-ku said the financial industry must embrace its social responsibility as part of the current administration’s inclusive economic policy.
“Banks have to listen to the public’s criticism that their services fail to meet expectations,” Choi said on Thursday during a ceremony launching a non-profit financial industry foundation.
“Social empathy for the banks’ process of creating profits is the foundation of [the public’s] trust in the banking industry,” Choi said. “There are some who have a critical view of the banks focusing too much on making profits from interest.”
He said while profits in banking come from the difference between interest charged on loans and interest paid on deposits, banks should work to improve the public’s perception of their industry by assuming more social responsibilities.
“[Local commercial banks] have to make efforts in expanding the financial markets for the lower and middle income groups by offering loans with mid-level interest rates and helping those who are overdue on loan payments,” Choi said. “Also the [credit risk] evaluation and management system needs to be improved so that SMEs and start-ups that have potential but low credit scores could have better access [to loans] without putting up collateral.”
Choi said the launch of the non-profit financial foundation created jointly by commercial banks management and labor unions will contribute to improving the public’s perception of the banking industry.
“It is more meaningful that the financial community has created this on its own, and not by government fiat,” Choi said. “The financial industry’s non-profit foundation activities should be an opportunity for gaining social empathy and offering a better understanding of the financial industry.”
He asked the foundation to take interest in social problems that Korean society faces today including youth unemployment, a low birth rate, an aging society, high living expenses and education costs.
Choi said the government will play its role in realizing an inclusive market.
“We will do our best to encourage financial services for lower and middle income households,” Choi said.
The government is working on restricting financial companies from increasing the financial burden on lower and middle income customers by raising interest rates. It plans on changing the way the spread on loan interest is calculated so that burden won’t rise. With the Bank of Korea governor already hinting at the possibility of raising the key interest rates, there have been growing concerns over the debt payments becoming harder to afford.
According to a September report by the Bank of International Settlements, Korea ranked third among 43 countries for the speed in which its household debt to GDP ratio was rising. Household debt accounted for 95.2 percent of Korea’s GDP at the end of March, 2.3 percentage points higher than a year ago. China and Hong Kong’s ratios were rising faster than Koreas.
BY LEE HO-JEONG [firstname.lastname@example.org]