SEOUL, Feb. 22 (Xinhua) -- South Korea's financial watchdog chief on Wednesday urged domestic banks to cut their excessive dependence on interest income amid growing public outcry over higher interest rates.
"Banks, which play a critically important public role, have recently been facing a gradually harsher criticism that they are not doing their part in efforts to coexist with people after reporting record-high earnings," Financial Supervisory Service (FSS) chief Lee Bok-hyun said in a meeting with foreign investors.
"Such negative sentiment stems, in part, from limited competition and other structural problems brought about by an oligopolistic market structure centered around a few large banking institutions," Lee noted.
Public outcry mounted over higher interest rates that increased a debt-serving burden among households struggling to pay back record-high debts, especially mortgage loans.
The country's central bank began to tighten its monetary policy stance in August 2021, hiking its benchmark interest rate from a record low of 0.50 percent to 3.50 percent in January this year.
Local banks reaped over 80 percent of their earnings from interest income, enjoying the benefit by providing hefty bonuses for employees, the FSS chief said.
He noted that the financial watchdog was looking into various ways to diversify banks' business models and improve their competitiveness in the mid- to long-run.
The financial watchdog chief vowed to proactively tackle potential risk factors arising from the markets, such as the real estate project financing (PF), saying the prolonged high interest rates can have a significant impact on the real estate market as well as the soundness of real estate PF loans.
"The FSS has switched its monitoring of financial firms with PF loan exposures to real-time surveillance of individual real estate PF businesses," said Lee.
"We are encouraging financial firms to secure enough capital against possible losses in order to minimize any shock from stressful situations on the financial system," he added. ■
