Financial industry should strive to raise productivity
Public criticism is mounting about Korean banks' "usurious" business practices, after the big-four financial groups and their banks joined the 1 trillion won ($890 million) in net profits club in the first half of the year. Rising interest rates have sharply pushed up the banks' interest income, and their non-banking affiliates, including insurance firms and credit card companies, also fared well.
The combined net profits of the four largest financial groups _ KB, Shinhan, Woori and Hana _ totaled 6.32 trillion won in the first six months. KB kept its position as the leading bank with a net profit of 1.91 trillion won. Their robust performance is attributable to a steady increase in household loans in defiance of financial authorities' regulations as well as sharp gains in interest income as a result of widening deposit-lending margins.
The banks came under criticism _ again _ for being bent on maximizing interest income by sharply raising lending rates while hiking deposit rates in driblets. Worse yet, some commercial banks went so far as to "manipulate" lending rates, imposing unduly high interest on borrowers.
To prevent these immoral practices, it is imperative that the industry lift its productivity. Data shows Korean bank employees are paid nearly twice as much their counterparts in the U.S., the U.K. and Japan, given the overall income levels of these countries. That is, Korean financial workers are garnering excessive income, although their international competitiveness, such as profitability, lags far behind those of financially advanced nations.
The financial authorities, banks and academia should work out measures to raise banks' productivity to the level of advanced countries. Regulators should not allow banks to bury themselves only in widening interest margins. The banking industry for its part must strive to learn advanced business techniques targeting global markets.
It will only be a matter of time before the Korean banks are eliminated from global markets as long as they only adhere to maximizing interest income. Koreans look forward to seeing their banks take the lead in the Fourth Industrial Revolution. It is wrong for banks to throw bonus parties by extorting money from struggling households and small businesses.
Public criticism is mounting about Korean banks' "usurious" business practices, after the big-four financial groups and their banks joined the 1 trillion won ($890 million) in net profits club in the first half of the year. Rising interest rates have sharply pushed up the banks' interest income, and their non-banking affiliates, including insurance firms and credit card companies, also fared well.
The combined net profits of the four largest financial groups _ KB, Shinhan, Woori and Hana _ totaled 6.32 trillion won in the first six months. KB kept its position as the leading bank with a net profit of 1.91 trillion won. Their robust performance is attributable to a steady increase in household loans in defiance of financial authorities' regulations as well as sharp gains in interest income as a result of widening deposit-lending margins.
The banks came under criticism _ again _ for being bent on maximizing interest income by sharply raising lending rates while hiking deposit rates in driblets. Worse yet, some commercial banks went so far as to "manipulate" lending rates, imposing unduly high interest on borrowers.
To prevent these immoral practices, it is imperative that the industry lift its productivity. Data shows Korean bank employees are paid nearly twice as much their counterparts in the U.S., the U.K. and Japan, given the overall income levels of these countries. That is, Korean financial workers are garnering excessive income, although their international competitiveness, such as profitability, lags far behind those of financially advanced nations.
The financial authorities, banks and academia should work out measures to raise banks' productivity to the level of advanced countries. Regulators should not allow banks to bury themselves only in widening interest margins. The banking industry for its part must strive to learn advanced business techniques targeting global markets.
It will only be a matter of time before the Korean banks are eliminated from global markets as long as they only adhere to maximizing interest income. Koreans look forward to seeing their banks take the lead in the Fourth Industrial Revolution. It is wrong for banks to throw bonus parties by extorting money from struggling households and small businesses.
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