Five major banks (Photo = each company)
As President Yoon Seok-yeol’s criticism of the banking sector becomes more intense, the oligopoly structure centered on the five major banks is receiving attention again. Since President Yoon ordered the abolition of the banking oligopoly system early this year, financial authorities have been pursuing various measures, but it is predicted that it will be difficult to change the already firmly established oligopoly structure in the short term.
According to the financial sector on the 5th, the interest income of the five major banks last year was 36.2071 trillion won, an increase of 21.8% (6.4973 trillion won) compared to the previous year (29.7098 trillion won). Bonuses amounted to 2.2988 trillion won, an 11.6% increase from a year ago. The average annual salary per employee was 110.06 million won, a 5.6% increase from the previous year (104.22 million won).
This year, interest income increased further. The cumulative interest income of the five major banks as of the third quarter was 30.9366 trillion won, an increase of 7.4% from a year ago, exceeding 30 trillion won for the first time.
It is pointed out that in an oligopoly structure where the five major banks occupy 70% of loans and deposits in the banking sector, the interest profits of the banks have increased, while the burden of interest repayment has increased for the common people. In fact, according to the Bank of Korea, the average monthly interest cost of households was 131,479 won (as of the second quarter), a 52.46% increase from a year ago (86,237 won).
The government’s view is that the so-called ‘money party’ is being held through the interest business. President Yoon Seok-yeol recently presided over an emergency economic and people’s livelihood meeting and criticized, “Our country’s banks sit in a kind of monopoly, making money and engaging in a lot of abuse of power.”
President Yoon Seok-yeol is speaking at the 21st Emergency Economic and Livelihood Meeting held at a cafe in Mapo-gu, Seoul on the 1st with housewives, office workers, and small business owners in attendance. (Photo = Yonhap News) In accordance with President Yoon’s order to eliminate the oligopoly system, the financial authorities have been promoting banking competition since the beginning of this year, providing refinancing loan infrastructure to eliminate oligopoly, and converting local banks into commercial banks.
The refinancing loan infrastructure is expected to have the effect of lowering the interest repayment burden on borrowers and increasing competition between banks and industries by allowing borrowers to change the credit loans they are currently using to lower interest rates. By the end of this year, we are pushing for refinance loans to be available for home loans in addition to credit loans.
New approvals, such as conversion of local banks to commercial banks and internet-only banks, are also being pursued, but no application for approval has yet been made. Daegu Bank announced that it would convert to a commercial bank this year, but the plan to convert to a commercial bank within the year was disrupted as problems with illegal account openings arose. Chungcheong Bank, a corporate finance center headquartered in Daejeon, is now in the early stages of completing its establishment strategy, and it is expected that it will take time to apply for approval. The authorities plan to pursue new approvals if there is sufficient funding and a feasible business plan.
After internet-only banks entered the market, competition between banks increased in household loans, but the oligopoly system could not be changed. According to the Financial Supervisory Service, the share of the five major banks in household loans across all banking sectors increased from 81.3% at the end of 2016 to 80.1% at the end of 2017, 79.6% at the end of 2019, 78.9% at the end of 2020, 77.9% at the end of 2021, and 76.8% at the end of last year. It is assessed that the level of competition in the household loan market has increased since the entry of internet banks as it has continued to decline. However, criticism is being raised about whether it is in line with the original purpose of the internet bank’s establishment, which was to expand loans to those with low to mid-credit, and questions are also being raised about whether it will be enough of a driving force to change the oligopoly system.
An official from the financial authorities said, “We are pursuing this as a mid- to long-term task to increase competition among banks through refinancing loan infrastructure and to resolve the oligopoly system as there are issues that require new banks to enter the market.”
Some experts point out that the introduction of innovative banks, which had slowed down due to the bankruptcy of Silicon Valley Bank (SVB) in the U.S., which aggravated liquidity problems, should be re-promoted.
Seo Ji-yong, a professor of business administration at Sangmyung University, said, “The introduction of innovative banks has slowed down as concerns have been raised that innovative banks expanding non-interest income businesses may undermine financial stability. “We must promote financial stability by expanding protection and strengthening liquidity ratios,” he said.
However, some point out that it is difficult to break the current oligopoly system because the nature of the financial industry has advantages such as economies of scale and banks being able to lower funding interest rates through enlargement.
Hwang Se-woon, a senior researcher at the Korea Capital Market Institute, said, “When internet-only banks such as Kakao Bank first entered the market, there was an expectation that they would be able to alleviate the oligopoly system of commercial banks to some extent, but in reality, it did not provide much help.” “We can try to mobilize, but it is unlikely to act as a driving force that can change the entrenched oligopoly system.”
An official from one of the five major banks said, “Banks raise funds through deposits, but corporate credit ratings are essential to issue bank bonds,” and added, “Large banks with large scale have a higher credit rating than small, new banks, so they have an advantage in raising funds.” “There is,” he said.
Meanwhile, with the end of the year approaching, the banking sector is also taking steps toward win-win financing. Hana Bank has already announced a financial support plan worth 100 billion won for small business owners immediately after President Yoon’s remarks, and other banks are also known to be considering additional support plans following the first half of the year.
Hana Bank President Lee Seung-yeol expressed his intention to personally visit small business owners in the Seoul area and provide practical and direct financial support, and Woori Financial Group Chairman Lim Jong-ryong also announced on the 3rd that he plans to prepare a financial support plan that meets the ‘people’s expectations’.
Reporter Kim Soo-hwan ksh@viva100.com
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2023-11-05 01:46:46
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