FSS chief presses banks on social obligations

The nation’s top financial regulator called on the banking industry to expand their social contribution activities during a meeting with 18 CEOs of banks on Monday.

“The financial sector has been criticized for glossing over difficulties of the underprivileged,” Financial Supervisory Service Gov. Kwon Hyouk-se told the participants.

“In proportion to their earnings, banks should have a deeper engagement with charities and causes for their own business interests,” he said.

The FSS chief’s remarks came in the context of some lenders, including foreign banks operating in Korea, facing criticism for doing little for the social good compared to the profits they take.

The FSS has continued to ask several foreign banks to systemize their contributions to society as a management tool to improve sustainable performance.

In addition, Kwon expressed his resolve for a stern regulatory inspection into banks loans amid the critical level of the debt held by households.

The governor recently instructed his staff to closely collaborate with the Bank of Korea in the ongoing probe.

In March, the BOK called for the FSS to conduct a joint probe into the household debt situation.

“The purpose of the joint investigation is to collect information needed to establish monetary policy including financial stability,” the central bank said.

The FSS and BOK are reviewing commercial banks’ lending practices and loan details in connection with households and small and medium-sized enterprises.

As for household debt, the central bank intends to assess current situations in more detail based on debt size, repayment methods, income levels and age of borrowers.

Commercial banks saw the ratio of overdue household loans to their total lending to the retail sector climb to the highest level in 36 months.

According to the FSS, the delinquency ratio in banks’ household loans came to 0.85 percent in February, up 0.07 percentage point from a month earlier.

The figure is the highest in three years since the ratio reached 0.88 percent in February 2009, when the nation was struggling with the global financial crisis.

The household loan delinquency ratio has stayed below 0.8 percent over the past few months under stricter oversight of financial regulators. The figure was 0.67 percent at the end of 2011.

Furthermore, the delinquency ratio in banks’ housing-collateralized lending surpassed 0.7 percent to reach 0.74 percent in February, compared with 0.69 percent a month before.

By Kim Yon-se (kys@heraldcorp.com)