The method of calculating loan rates in the banking sector and the fairness of household loan regulations were scrutinized during a national audit. While the barriers for general borrowers are increasing, some corporate and public institution employees are reportedly benefiting from corporate loans that fall into regulatory blind spots. Financial authorities announced they are discussing linking corporate loans to the total debt service ratio (DSR) regulation.
On October 22, the National Assembly's Political Affairs Committee conducted a comprehensive audit of nine institutions, including the Financial Services Commission, the Financial Supervisory Service, the Deposit Insurance Corporation, Industrial Bank of Korea, and Korea Exchange Bank.
Democratic Party lawmaker Min Byung-deok pointed out that after the five major banks, regional banks and internet-only banks have also begun raising additional interest rates or reducing preferential rates. Although a legal amendment prevented banks from reflecting statutory costs in additional interest rates, they are effectively raising rates by adjusting target profit margins. In response, Min called for a joint special inspection by the Financial Services Commission and the Financial Supervisory Service, to which Financial Supervisory Service head Lee Chan-jin replied that managing additional interest rates is a crucial supervisory issue directly related to people's livelihoods.
People Power Party lawmaker Song Eon-seok highlighted that corporate loans amount to 9.14 trillion won, including 1.02 trillion won from public institutions, 1.7 trillion won from 29 securities firms, and 6.3 trillion won from seven major corporations. Compared to 2022, loans from securities firms increased by 106.8%, while those from large corporations rose by 92.8%. Song criticized that while DSR regulations apply to the general public, some employees can access corporate loans with looser regulations. Lee responded that discussions are ongoing with the Financial Services Commission, but no specific direction has been established.
The legal basis for managing the total amount of household loans was also questioned. People Power Party lawmaker Cho Jung-hoon criticized the financial authorities for effectively limiting the total loan amounts of private banks without clear justification. Social Democratic Party lawmaker Han Chang-min urged for relief measures for borrowers, noting that as of the end of the second quarter, only about 100 trillion won of the 767 trillion won in mortgage loans were fixed-rate loans, accounting for just 13%.
The governance structure of financial groups was another contentious issue. Democratic Party lawmaker Kim Yong-man pointed out that 38 retired executives from six holding companies have moved to advisory roles in affiliates, yet their compensation and roles are not disclosed. Democratic Party lawmaker Jeon Hyun-hee raised concerns about the potential for favoritism and conflicts of interest, citing that 78 former Financial Supervisory Service officials have rejoined financial groups in the past five years. Financial authorities stated they would consider reflecting the issues of advisory roles in governance improvement plans.
The effectiveness of the voice phishing compensation system was also under scrutiny. Jeon noted that while the total damage last year was 281.1 billion won, the voluntary compensation amount from banks was only 1.08 billion won, with the compensation rate for victims remaining at 10-20%. Lee indicated that there is a need to review the institutionalization of no-fault liability and improve compensation standards.
Concerns about the deteriorating soundness of the second financial sector were also raised. Over the past year, savings banks and mutual finance saw a decrease of 29.5 trillion won in deposits, while the banking sector's deposits increased by 166.8 trillion won. Additionally, concerns were raised about the risks to small rental car companies due to the expanded handling limits for capital companies, as well as the fact that only about 2 trillion won of the 18 trillion won approved for the National Growth Fund has been allocated to support small businesses.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.