A divide is emerging in the financial sector regarding the government's policies aimed at expanding productive and inclusive finance. While domestic financial holding companies have emphasized the importance of inclusive finance, their business reports filed in the United States indicate that these policies could pose risks to profitability and asset soundness.
According to the financial sector on May 14, KB, Shinhan, and Woori Financial Groups included the productive and inclusive finance policies as a new item under "investment risk factors" in their business reports submitted to the U.S. Securities and Exchange Commission (SEC) at the end of last month.
This marks the first time that references to productive and inclusive finance have appeared in the investment risk factors section of these reports. KB Financial noted in its report that the implementation of inclusive finance policies may necessitate adjustments in business practices, potentially increasing the risk of customer defaults. Similarly, Shinhan Financial specified the possibility of a decline in soundness as an investment risk associated with its response to inclusive finance policies. Woori Financial mentioned that engaging in productive finance could lead to unintended costs or losses.
Industry insiders explained that the inclusion of these risk factors in U.S. reports reflects the need to disclose potential risks that could affect corporate performance, as failing to do so could expose them to class-action lawsuits.
However, the troubling aspect is that this information was not included in the domestic business reports submitted to the Financial Supervisory Service. This discrepancy has raised questions about the commitment to policy cooperation domestically while separately acknowledging risks in overseas disclosures. The five major financial groups have actively supported government policies, proposing a total of 70 trillion won in inclusive finance support over the next five years, aiming for 2030.
A financial authority official stated, "While it is true that inclusive finance is directly related to the soundness of financial institutions, it is regrettable that such information emerged through foreign disclosures. We hope that the improvements being made to increase the funding capacity of banks will be taken into account."
The recent controversy surrounding the private bad debt management company, Sangnoksoo, has also drawn renewed attention in light of the financial sector's inclusive finance initiatives. Sangnoksoo was established in 2003 by major banks and credit card companies to manage a surge in long-term overdue debts during the credit card crisis. However, revelations that it has been collecting on long-term overdue debts for over 20 years have sparked accountability discussions within the financial sector. The controversy intensified as it was reported that Sangnoksoo's shareholders received over 40 billion won in dividends over the past five years, raising concerns about the inconsistency between the push for enhanced financial support for the underprivileged and the practices of debt collection and dividend distribution.
In response, President Lee Jae-myung has been delivering strong messages to the financial sector, emphasizing the importance of inclusive finance. On May 14, he stated on his X (formerly Twitter) account, "Finance is a quasi-public business based on national issuance power and monopolistic licensing, and it must fulfill its public responsibilities. We will swiftly and maximally secure financial support for the underprivileged and inclusive finance."
According to the financial sector on May 14, KB, Shinhan, and Woori Financial Groups included the productive and inclusive finance policies as a new item under "investment risk factors" in their business reports submitted to the U.S. Securities and Exchange Commission (SEC) at the end of last month.
This marks the first time that references to productive and inclusive finance have appeared in the investment risk factors section of these reports. KB Financial noted in its report that the implementation of inclusive finance policies may necessitate adjustments in business practices, potentially increasing the risk of customer defaults. Similarly, Shinhan Financial specified the possibility of a decline in soundness as an investment risk associated with its response to inclusive finance policies. Woori Financial mentioned that engaging in productive finance could lead to unintended costs or losses.
Industry insiders explained that the inclusion of these risk factors in U.S. reports reflects the need to disclose potential risks that could affect corporate performance, as failing to do so could expose them to class-action lawsuits.
However, the troubling aspect is that this information was not included in the domestic business reports submitted to the Financial Supervisory Service. This discrepancy has raised questions about the commitment to policy cooperation domestically while separately acknowledging risks in overseas disclosures. The five major financial groups have actively supported government policies, proposing a total of 70 trillion won in inclusive finance support over the next five years, aiming for 2030.
A financial authority official stated, "While it is true that inclusive finance is directly related to the soundness of financial institutions, it is regrettable that such information emerged through foreign disclosures. We hope that the improvements being made to increase the funding capacity of banks will be taken into account."
The recent controversy surrounding the private bad debt management company, Sangnoksoo, has also drawn renewed attention in light of the financial sector's inclusive finance initiatives. Sangnoksoo was established in 2003 by major banks and credit card companies to manage a surge in long-term overdue debts during the credit card crisis. However, revelations that it has been collecting on long-term overdue debts for over 20 years have sparked accountability discussions within the financial sector. The controversy intensified as it was reported that Sangnoksoo's shareholders received over 40 billion won in dividends over the past five years, raising concerns about the inconsistency between the push for enhanced financial support for the underprivileged and the practices of debt collection and dividend distribution.
In response, President Lee Jae-myung has been delivering strong messages to the financial sector, emphasizing the importance of inclusive finance. On May 14, he stated on his X (formerly Twitter) account, "Finance is a quasi-public business based on national issuance power and monopolistic licensing, and it must fulfill its public responsibilities. We will swiftly and maximally secure financial support for the underprivileged and inclusive finance."
* This article has been translated by AI.
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