The Financial Supervisory Service pointed out on the 14th that the concentration of real estate loans hinders the growth of the Korean economy during a meeting with the chairpersons of 18 domestic banks.
Kim Byeong-chil, the FSS deputy director in charge of banks, held a regular meeting with the chairs of the banking sector at the Bank Hall in Jung-gu, Seoul, that day and noted, “The concentration of real estate-related loans can trigger financial system risks in the event of external shocks.”
Kim added, “The increasing proportion of loans based on collateral and the concentration of funds in the institutional sector of real estate, along with the fact that a significant portion of revenue is driven by the expansion of interest, presents another challenge for the sustainability of the bank's revenue structure.” He requested that the board rigorously examine the management strategies of executives with a balanced perspective to ensure that banks can fulfill their role as intermediaries for productive sectors.
He also requested that banks fulfill their social responsibility in creating an inclusive financial environment to support the recovery of vulnerable groups.
Regarding the modernization of governance structures, it was assessed that several institutional and procedural improvements are being made. Kim emphasized, “The governance of an organization is not a task that ends with one overhaul; it must continually evolve and be complemented in response to changes in the management environment and internal and external conditions, like digital transformation and the strengthening of international norms.” He urged that continuous institutional improvements be made to ensure substantive discussions and checks made possible by safeguarding the roles and functions of the board.