The Financial Supervisory Service (FSS) Governor, Lee Chan-jin, has reiterated the emphasis on ‘financial consumer protection’ to CEOs of savings banks since his early days in office. Speaking at a meeting with these CEOs held at the Savings Bank Association in Mapo-gu, Seoul, on the 4th, Governor Lee said that the deterioration of savings banks’ soundness due to the failure of project financing (PF) is a result of focusing on short-term profitability rather than considering financial consumers. He urged that all stages, from product design and portfolio planning to sales and post-management, should be evaluated from the financial consumers’ perspective.
Governor Lee also noted that financial consumers using savings banks often do not fully utilize important systems like the right to request debt adjustment and interest rate reduction. He encouraged facilitating these consumers to fully exercise their rights and benefit from these provisions.
Similar to his previous meetings with bank presidents and insurance company CEOs, Governor Lee highlighted the importance of protecting financial consumers. He also called for strengthening internal controls, warning that while strict internal controls in the first financial sector might increase crime targeting users of savings banks and secondary financial institutions, efforts like enhancing security services should not be dismissed as mere costs. With the deposit protection limit increased to 100 million won, he emphasized the need to manage soundness to protect depositor assets and trust.
Additionally, Governor Lee addressed the role of savings banks as financial institutions providing funds to the underprivileged. Originally established to alleviate the burdens of small merchants and low-income households, savings banks have focused excessively on high-risk real estate loans driven by growth and short-term profits, leading to repeated deterioration in soundness and profitability amid the real estate market downturn. He urged them to avoid high-risk credit operations tied to real estate trends and focus on providing funds to local low-income people, medium-to-low credit customers, and small business owners.
Lastly, Governor Lee called for thorough soundness management, including clearing remaining bad PFs and strengthening provisions for allowances for bad debts and capital expansion to ensure loss absorption capacity. Once soundness concerns are addressed, he suggested that easing of business area restrictions and M&A-related regulations could follow.
CEOs of savings banks at the meeting expressed various concerns, including the need for financial authorities’ policy support and institutional environment setting due to the intensified competition from increased non-face-to-face transactions and weakened new growth engines. They also committed to contributing to productive financial activation in the region by selecting and supporting growth-potential SMEs and self-employed individuals and continuing efforts to improve soundness, such as proactive PF organization in the second half.