FSS chief defends intervention in bank interest rates as 'not ideal' but necessary

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FSS chief defends intervention in bank interest rates as 'not ideal' but necessary

Published: 17 Oct. 2024, 17:33

SHIN HA-NEE
shin.hanee@joongang.co.kr

Financial Supervisory Service Gov. Lee Bok-hyun speaks during a parliamentary audit held at the National Assembly in western Seoul on Thursday. [NEWS1]

Financial Supervisory Service (FSS) Gov. Lee Bok-hyun defended the regulator’s interference in bank interest rates against criticism of overstepping authority, suggesting that it was a necessary step to curb soaring mortgage loans.

“I am not suggesting that the manner of the intervention was ideal, but without reining in the growth of household debt, the situation would have gotten much more difficult in regards to a reduction of the key interest rate or real estate price hikes,” said Lee during a parliamentary audit held at the National Assembly in western Seoul on Thursday.

The comment was in response to a question by Democratic Party (DP) Rep. Yoo Dong-soo, who pointed out that Lee’s previous comments on market interest rates amounted to capital market intervention by the government, which “hampers the market predictability and therefore reinforces the Korea discount.”

In September, Lee apologized after facing criticism over a series of seemingly contradictory statements regarding household loan policies. The governor urged banks to implement tighter regulations on household loans to curb rising debt, while also criticizing them for excessively raising interest rates, and then made comments indicating a potential easing.

Lee once again offered an apology on Thursday, but stressed that there is no inconsistency in government agencies’ stance on household loan policies, saying “the statements and stances expressed [by FSS] are all based on the consensus within the [government’s] economic team.”

“During the steep surge of household debts back in July and August, the oligopolistic banking industry had not been operating properly, to which I have requested that the banks manage the debt level in line with their plans submitted earlier,” said Lee.

During the audit, the governor promised to hold those responsible for serious financial incidents accountable, and to advance market integrity.

“We will do our best to prevent the recurrence [of financial incidents] by expediting the implementation of the responsibility map and supporting the strengthening of internal control systems,” said Lee.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]