[fn Editorial] The Prerequisite for Productive Finance is Removing Regulatory Barriers

The financial authorities have decided to promote innovative measures to transform the business practices of the financial sector, which rely on interest margins, into productive finance. Kwon Dae-young, Vice Chairman of the Financial Services Commission, held a meeting with the heads of financial associations on the 28th to discuss these measures. This follows President Lee Jae-myung's remarks that the financial sector should not just cling to easy 'interest play' but also pay attention to expanding investments.

Despite the difficult economic situation, the interest income of the four major financial holding companies, including KB Kookmin, Shinhan, Hana, and Woori, reached 21.0924 trillion won in the first half of this year, with net profit reaching a record high of 10.3254 trillion won, up 10.5% from the same period last year. The increase in interest income in the financial sector is largely due to the suppression of loan interest rate cuts to stabilize real estate prices, even as the base interest rate is lowered. The gap between deposit and loan interest rates of the four major banks widened from 0.53~0.69%p in the first half of last year to 1.32~1.45%p from January to May this year. By following policies, they have ended up conducting 'easy business' and increasing profits.

However, fundamentally, it is largely due to the practices of the financial sector, which have focused on non-productive and easy-money-making businesses such as household loans and real estate. As President Lee said, by falling into interest play, they remain 'big frogs in a small well.' It is also true that they have neglected loans to companies that are short of funds or overseas investments. Last year, major Japanese banks earned more than 50% of their operating profits overseas, but the overseas profit ratio of our financial groups is only 11%.

In the entire national economy, finance should play the role of supplying oxygen and nutrients, like blood vessels and blood. The real economy and finance must harmonize and blend for the overall economy to develop. Nevertheless, our financial sector is not free from criticism that it is holding a 'money feast,' as mentioned by the previous administration, by settling into stable and low-risk mortgage loans.

If part of that interest is money earned by small business owners and self-employed people with their blood and sweat, then a win-win plan to cut interest even a little should be considered first. The previous administration did so. At the same time, it is right for money to flow into advanced industries for the future of the country. If innovative businesses cannot even be attempted due to lack of funds, does that make sense? What the government refers to as productive investment is precisely that.

The financial industry has reportedly decided to actively cooperate in creating a 100 trillion won public-private joint fund for investment in advanced, venture, and innovative companies in response to government policies. They also decided to expand financial support for small business owners and resolve financial difficulties. It is something that should naturally be done.

The financial sector will follow government policies, but there will be many things they want to say. In particular, there is concern about so-called government-directed finance. While there are points that our financial companies need to improve, excessive government intervention and interference should be restrained so as not to infringe on business freedom.

Another task is to untangle the web-like financial regulations. The most difficult part for financial companies is the hundreds of regulations required to pursue a single business. The government also said it would comprehensively change regulations and supervisory practices that act as obstacles while inducing productive investment by financial companies. This time, rather than just talking, unnecessary obstacles must be removed so that funds can circulate well. It is a prerequisite to draw financial companies to take the lead in economic recovery.