The financial authorities are set to launch an 'Inclusive Finance Task Force' soon, marking a significant step toward publicizing the financial sector's role as emphasized by President Lee Jae-myung. While the heads of major commercial banks express support for the government's initiative to expand inclusive finance, they also voice concerns about uniform target setting and evaluations focused on short-term results.
According to the financial sector on May 10, the Financial Services Commission plans to hold a kickoff meeting for the Inclusive Finance Task Force (tentative name) this month. Specific preparations, including the formation of subcommittees and agenda discussions, are currently underway.
The establishment of the task force follows recent strong expressions from the Blue House regarding the public functions of finance. President Lee pointed out during a Cabinet meeting on May 6 that he feels “the public nature of financial institutions is too weak.” Kim Yong-beom, head of the Blue House Policy Office, also criticized the issue of financial exclusion for low- and medium-credit individuals as a “structural contradiction that has been meticulously neglected.”
The task force is expected to discuss a wide range of topics, primarily focusing on reforming the credit evaluation system. Changes are anticipated in the current credit assessment methods, which fail to adequately reflect the future potential of individual borrowers. Additionally, the task force will address issues related to the existing lending system, which primarily serves high-credit borrowers while imposing barriers for those with medium to low credit scores.
In response to the government's direction, the heads of major commercial banks generally expressed agreement. A survey conducted by Yonhap News among five major bank leaders, including Lee Hwan-joo of KB Kookmin Bank, Jung Sang-hyuk of Shinhan Bank, Lee Ho-sung of Hana Bank, Jeong Jin-wan of Woori Bank, and Kang Tae-young of NH Nonghyup Bank, revealed that none of the bank heads denied the public nature of banks.
All bank leaders acknowledged that “banks have a quasi-public institution nature,” stating, “While banks operate as businesses based on market principles, they conduct operations on a public foundation that includes state authorization, trust, depositor protection, and financial stability, which imposes a much higher level of public nature and social responsibility than ordinary companies.”
Regarding the criticism that vulnerable borrowers are excluded from the existing credit evaluation system, they noted, “It is time to evolve from a simple selective finance model to a data and technology-based 'discovery finance.' We are enhancing financial accessibility through the advancement of credit evaluation by combining existing financial data with non-financial alternative data.”
However, there were overall concerns about evaluating how much inclusive finance has been implemented and the potential for profit or loss based on that evaluation. One bank leader pointed out, “If the expansion of uniform inclusive finance is evaluated solely based on loan volume or interest rates, it could ultimately burden the real economy and increase risks across the market in the long run.”
Other bank leaders also expressed worries that “excessive interest rate reductions or debt relief could create a sense of relative deprivation and moral hazard for diligent repayers,” and that “a focus on short-term results could distort market functions and worsen soundness,” potentially burdening the autonomy and stability of financial institutions.
* This article has been translated by AI.
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