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| Financial Services Commission Vice Chairman Kim So-young speaks at a seminar in Seoul, Monday. Yonhap |
By Lee Min-hyung
Financial industry players here are expressing regret over what they call "unrelenting and unilateral" government demands to revamp reward systems.
After banks chalked up record earnings last year on global interest hikes, President Yoon Suk Yeol and his administration stepped up pressure on lenders, criticizing their excessive earnings growth driven mostly by their widened loan-to-deposit margins.
The latest pressure centers on what financial watchdogs consider "excessive incentives" delivered recently by banks to their employees and executives. According to the nation's four major banks ― KB, Shinhan, Hana and Woori ― they racked up a combined net profit of 11.7 trillion won ($9 billion) in 2022, the largest in history.
Starting this month, financial authorities have held weekly task force meetings to discuss measures to improve banks' management and sales practices. The task force was launched last month to look into whether it is reasonable for banks to generate such a huge interest margin.
But officials from the financial circle expressed discontent over the government's ever-growing political pressure, particularly on banks and some financial sectors.
"Banks and financial institutions fulfilled their social roles during the pandemic era by extending loans even to those who are not capable of paying back interest," an official from a major financial institution here said.
"We have for the past year raised the interest rate in line with the global rate hike cycle," the official said. "Banks have been able to generate record earnings due to the macroeconomic environment change. We have also recently abided by the government's request to cut loan interest rates, as a growing number of households suffer from interest burdens."
Despite their complaints, financial regulators seem to show little sign of abating their pressure on financial firms here.
"Banks' record revenues look to have been generated by the external factor of rate hikes, not efforts by their executives and employees," Financial Services Commission Vice Chairman Kim So-young said. "They need to offer rewards and incentives in accordance with the practical performance of employees, rather than external factors."
Hana Institute of Finance researcher Oh Young-sun said both financial firms and the government should exchange more communication to establish fair reward systems within the financial circle.
"Financial companies should try their best to explain in detail their reward system, and financial authorities need to place more attention on the method of calculation on rewards offered to executives of financial firms, rather than focusing on the total salary and incentive they receive," Oh added.
