Next year's preparation for sustainable finance season 2 is weighing heavily on banks. The banking sector plans to support small businesses and the underprivileged with sustainable finance initiatives, continuing from this year into the next. The problem is that sustainable finance was initiated following President Yoon Suk-yeol's comments about 'the banks making a profit from interest.' Banks are reportedly feeling pressured to pursue policies requested by President Yoon amid growing political uncertainty.
According to the financial sector on the 18th, the banking sector is forming a task force (TF) centered around the Korean Bankers Association to develop sustainable tailored support measures for small businesses and is preparing sustainable finance support plans. While the specific support measures and scale have yet to be determined, it has been reported that a plan to reduce the debt of small businesses and the underprivileged is a strong possibility.
This year's sustainable finance took the form of 'cashback,' where interest paid by small businesses and the underprivileged is returned. The banking sector injected 2.1 trillion won into this initiative. A banking official stated, "I understand that they are considering plans to reduce liability rather than cashback," and added, "The scale of support is undecided, but I expect it to be similar to this year's level."
Sustainable finance is a policy that began under pressure from the Yoon Suk-yeol administration. President Yoon criticized the banking sector early last year for terms like 'interest business' and 'serving the banks,' while financial authorities pressured the banking sector to fulfill its social role, given that they generated record revenues amid high interest rates. As a result, the banking sector unveiled a sustainable finance package worth 2.1 trillion won at the end of last year. At that time, President Yoon publicly thanked the bank executives for their efforts in sustainable finance.
Sustainable finance season 2 also began at the request of President Yoon. On the 2nd, President Yoon held a forum on the livelihoods of small businesses and local commercial areas in Gongju, Chungcheongnam-do, where he urged the banking sector to adjust the debt of small businesses, and the Korean Bankers Association immediately responded that they would prepare a support plan within the year. However, in the context of an ongoing state of emergency and impeachment politics, banks are questioning whether there is a need to pursue sustainable finance again.
There is also concern that sustainable finance may become institutionalized. From the banking sector's perspective, the government's demand for sustainable finance support for two consecutive years effectively amounts to a windfall tax. Some are cautiously suggesting that there may be unconstitutional elements in the demand for sustainable finance. Nevertheless, under government pressure, the banking sector is reluctantly preparing for sustainable finance season 2. The banking sector is worried that such demands will continue regardless of whether the administration is maintained or changed.
An executive from a major commercial bank noted, "Given that it has been confirmed that banks will pay trillions of won when the government pressures them, I think this demand will continue," and added, "If the administration changes, there will certainly be pressure asking why it was done under the previous administration but not during ours." This leaves the banking sector feeling uneasy despite achieving record results this year.