financial regulator-banks
FSS chief urges banks to diversify income sources other than interest payment
SEOUL, Feb. 22 (Yonhap) -- South Korea's financial regulator chief on Wednesday urged local banks to reduce their excessive dependence on interest income and diversity profit sources to sharpen the overall competitive edge in the global market.
Lee Bok-hyun, head of the Financial Supervisory Service (FSS), made the remark in a meeting with foreign investors in Seoul amid criticism that banks have reaped record profits from interest income and handed out hefty bonuses to employees while people are suffering from high borrowing costs caused by the central banks' monetary tightening.
President Yoon Suk Yeol recently called for curbing excessive profits of banks and instructed financial regulators to draw up measures to ensure "the people do not feel out of place due to banks' money feast."
"They have been complacent about the oligopolistic structure, reaping more than 80 percent of their earnings from interest income, and enjoyed the benefit by themselves. I think it is a great cause for concern as it may weaken the growth potential of the sector," Lee told the meeting.
"Furthermore, overseas expansion seems inevitable for Korean banks in the face of a high level of saturation in the domestic market. But if they stay the way they are now, they will likely have a hard time gaining an edge in the global market," he added.
He urged banks to seek more income sources other than interest payment from customers, saying that the FSS is currently exploring "various ways" to encourage their move to diversification.
"We are looking into various ways to encourage diversification of banks' business models and improve their competitiveness in the mid- to long-run," he said.
"By doing so, we believe that Korea's banking industry will be able to get more competitive and efficient, which will make the Korean financial markets more attractive to investors," he added.
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