The financial authorities will release a framework next month to evaluate banks' inclusive finance efforts. Banks that receive good evaluations will get reduced contribution rates to the Korea INclusive Finance Agency (KINFA).
According to the Financial Services Commission on the 5th, the policy microfinance subcommittee meeting for a framework to evaluate inclusive finance in the banking sector is scheduled for next week. An official at the Financial Services Commission (FSC) said, "The quantitative criteria are virtually all in place, and we are further refining the qualitative assessment."
The main indicators of the inclusive finance evaluation framework the Financial Services Commission (FSC) is devising consist of microfinance, governance, and the non-financial institutional sector. Microfinance refers to the supply of microfinance such as the New Start Fund and the performance of restructuring vulnerable borrowers' debt, including the write-off of arrears claims. This is expected to account for about 50% of the total evaluation weight.
The section the Financial Services Commission (FSC) is grappling with concerns governance-related evaluation. The intent is to examine how genuinely inclusive finance has been embedded into the system in the course of running the organization. The Financial Services Commission (FSC) does not plan to award high scores merely for appointing a chief officer for inclusive finance or creating a dedicated department.
Whether to disclose bank-by-bank rankings is undecided. While the top or outstanding banks could be disclosed, it is known that opinions are divided even among subcommittee Commissioners on a plan to disclose the rankings of all commercial banks.
The Financial Services Commission (FSC) is also discussing improvements to the indemnity system to promote inclusive finance. The aim is to allow financial companies to pursue policies without fear of sanctions even if a certain level of losses or complaints arises in the process of supporting vulnerable borrowers or expanding policy finance.
Banks that excel in inclusive finance will have their contribution rates to the Korea INclusive Finance Agency (KINFA) reduced, while the opposite will see their contributions increase. The linkage of contributions is expected to take effect from next year following an amendment to the enforcement decree of the Microfinance Act.