Lee Chan-jin, head of the Financial Supervisory Service, instructed the savings bank sector to "avoid high-risk lending concentrated in the real estate market and focus on supplying funds to low-income individuals, those with low credit, and small businesses."
Lee noted during a meeting with savings bank chief executives on the morning of the 4th at the Savings Bank Association in Mapo, Seoul, that "the project financing (PF) failures, which are the cause of deteriorating soundness, are a result of focusing solely on short-term profitability over consumer considerations."
Lee assessed positively that the arrears rate of savings banks has turned to a downward trend in the first half of this year and urged them to pay attention to soundness management. He asked them to establish a long-term strategy to improve credit evaluation capabilities and infrastructure and strengthen their business foundation.
Lee stated, "The FSS will also prepare institutional incentives to expand low-income finance and will continue to push for regulatory rationalization necessary for revitalizing business activities."
He urged that each savings bank must implement its own plans for managing non-performing assets without disruption and maximize loss absorption capacity through sufficient provision for bad debts and capital expansion. In response to the industry's demands for relaxing operational regulations, such as restrictions on business areas and mergers and acquisitions (M&A), he noted, "Once concerns about soundness are alleviated, flexibility can be expected."
On this day, he also presented "protecting financial consumers" as a top priority. He urged that consumer protection should be considered in all operations, including the design and sale of financial products, internal controls, and risk management. Especially, he emphasized the need to actively inform users of second-tier financial institutions, who are often financially vulnerable, about their rights to request debt adjustments and interest rate reductions. He also called for strengthening internal controls to prevent financial crimes and incidents, including voice phishing and illegal account openings.
Lee warned that "as internal controls in first-tier financial institutions strengthen, there is also a possibility that financial crimes targeting users of second-tier financial institutions will increase," adding that "with the recent increase in the deposit protection limit, the transaction amounts in savings banks may grow, which could lead to greater customer harm." He urged for the establishment of security infrastructure and strengthening of internal controls, and advised actively implementing facial recognition systems and secure blocking services to prevent non-face-to-face financial crimes.