FSS chief: Insurers need to brace for external uncertainties


Financial Supervisory Service Gov. Kwon Hyouk-se urged commercial banks Friday to resume their suspended household loans.

“The FSS will instruct the banks to resume the lending,” Kwon told reporters before attending a meeting with chief executives in the insurance industry.

His comments came a day after the National Agricultural Cooperative Federation, or Nonghyup, halted selling of all household lending products and several banks including Shinhan Bank decided to suspend some products for several weeks for risk management.

Though regulators have been strict in supervising banks’ lending amid mounting household debts, he clarified that banks are required to offer loans to eligible customers as usual and simultaneously refrain from recklessly lending.

Concerning the speculation that banks’ suspension came in the wake of a regulatory guideline urging them to set the monthly growth rate of household lending at the maximum 0.6 percent, Kwon said it would be OK if banks carry out the lending business “elastically” according to their respective situation.

The FSS and the Financial Services Commission have already denied news reports that they have sent banks official letters stressing the guideline.

But some other banks including Kookmin Bank, the nation’s largest lender, have not participated in the lending suspension.

An FSS official said it is true that banks are moving to curb household loans under regulatory instruction. But he described the situation as a happening, adding, “Groundless rumors involving the official letter fanned anxiety of individual borrowers.”

In the meeting with the CEOs of insurance firms, Kwon stressed that insurance and non-life insurance companies should enhance internal controlling not to engage in unfair intra-group trading with their major shareholders.

“The FSS will bolster inspections on the unauthorized practices in the insurance industry,” he said.

The chief regulator also called for the CEOs to secure sufficient equity capital and reduce dividends to brace for further external uncertainties.

In the meantime, Korea’s top central banker said on the day that as the amount of local households’ debt remains high, the country needs to make appropriate efforts to curb its indebtedness.

“As households’ debt size is large, (the country) should move to reduce it,” Bank of Korea Gov. Kim Choong-soo told reporters. “(We) need to make efforts so as to produce appropriate effectiveness.”

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