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Korean banking 'oligopoly' targeted by regulators

Published: 03 Mar. 2023, 16:27

Financial Services Commission Vice Chairman Kim So-young speaks at a meeting held in central Seoul on Thursday to improve the management and customs of banks. [FSC]

A range of possible remedies for an alleged banking 'oligopoly' were suggested by regulators on Thursday, from better information to outright intervention.

The Financial Services Commission (FSC) held a meeting to discuss measures to intensify competition in the banking industry to address what it claims is an oligopoly of five commercial banks: KB, Shinhan, Hana, Woori and NongHyup.

It was attended by the FSC Vice Chairman Kim So-young and representatives from private and public institutions with a goal to improve management, customs and systems of banks.

Turning savings banks into regional banks and regional banks into commercial banks and authorizing new banks were discussed at the meeting, according to the FSC on Friday. It also plans to review building an online service that makes it easier for bank customers to compare deposit rates and refinance loans.

The FSC said it will increase disclosures on loan-deposit rate differences and review rate-setting mechanisms and the bonuses calculations.

Banks have been providing information on deposit-loan spreads on new lending and savings since last year to improve transparency in their operations and provide customers with better choices in choosing financial products.

“We will review and develop an index that could ease the increasing rate gap if the open market interest rate rises excessively,” the FSC said in a statement. “Whether there are any players interested in entering the market should also be reviewed.”

The regulators were incensed when the banks paid out huge bonuses after making record profits last year, as individuals and corporations struggled with higher interest rates.

President Yoon Suk Yeol pointed out the need to curb excessive bank profits and instructed financial regulators to come up with measures to ensure people don’t feel despair over bonuses given to bank employees.

Banks have since been told to diversify their sources of income away from interest income.

The Fair Trade Commission also announced plans late last month to review bank sales policies or unfair terms and conditions that could limit competition.

The FSC said it will hold another round of meetings on March 8 to discuss the effectiveness of measures that may be used to promote competition between bank and non-banks. Distribution of bonuses to employees will also be discussed later this month.

BY JIN MIN-JI [[email protected]]