[비즈한국] Financial Supervisory Service (FSS) Governor Lee Bok-hyun is, externally, the face representing financial authorities. In particular, he is often praised for having an ‘unprecedented presence’ among FSS governors, as he proactively voices his opinions on various financial issues.
However, there are many within and outside the Presidential Office who speak of a ‘crisis theory’ regarding FSS Governor Lee. Especially since the general election held last April, there is open talk that he has ‘fallen out of favor’ with key figures in the Presidential Office and other financial authorities, with the exception of President Yoon Suk-yeol. There is even talk already that those with prosecutorial backgrounds will be excluded from the next FSS governor appointment.
“I think we need to intervene in banks more”
FSS Governor Lee recently publicly stated his position regarding the rapid increase in household loans by banks. Appearing on KBS ‘Sunday Diagnosis’ on the morning of the 25th, he sent a warning message, hinting that he would further strengthen intervention in banks. He pointed out that banks have aggravated difficulties for consumers by failing to proactively adjust their household loan portfolios and instead managing them by belatedly raising loan interest rates.
Regarding the banks' interest rate hikes, FSS Governor Lee said, “This is not what the authorities wanted. Banks are resorting to easy methods like raising interest rates when they deviate significantly from their planned household loan management schedules,” adding, “Raising interest rates not only allows banks to earn more money but also helps suppress demand.” He continued, “The supervisory authority's preference is for them to systematically manage their household loan portfolios in advance rather than using such methods,” and warned, “While we have intervened less out of respect for bank autonomy, it seems we will have to intervene more aggressively in the future in light of the real estate market situation.”
In response, there is criticism from the banking sector that the ‘financial authorities are blaming the banks.’ In fact, at the beginning of last month, the FSS gathered executive vice presidents of commercial banks and ordered them not to expand loans unreasonably. Accordingly, banks scrambled to raise mortgage rates in an attempt to control consumer loan demand. Regarding FSS Governor Lee’s point that ‘he never asked banks to raise interest rates,’ a complaint is emerging that “while he claims he never directly demanded interest rate hikes, it was also Governor Lee who scolded banks for lowering loan rates when they followed the Bank of Korea’s rate hikes.”
An official from the financial authorities pointed out, “The very mention of a financial supervisory head interfering in the calculation of loan interest rates by private financial companies is somewhat unusual,” adding, “Areas such as the expansion of real estate loans due to interest rates should be led more by the Financial Services Commission (FSC). I don’t know why the head of the FSS, whose job is to supervise and monitor accidents or risks at banks, is taking the lead in making such remarks.”
He has made too many ‘enemies’
Recently, there are many voices in the Presidential Office and financial authorities raising issues with this ‘method’ of FSS Governor Lee. They argue that he does not respect the traditional rhetoric or systems of the financial sector.
A legal professional who has worked as a senior official at the FSC pointed out, “The Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service each have different roles but must function organically. In a conservative government, in particular, the heads of each institution carry symbolic weight, so they must convey messages to the market with appropriate words and tone.” He added, “In that respect, FSS Governor Lee crosses the roles and rules of other organizations and speaks or acts as if he is the ‘number one’ in the financial sector, having completely lost the trust of key financial figures centered around the Ministry of Economy and Finance.”
A financial sector insider close to the Presidential Office also hinted, “There was an attempt to replace FSS Governor Lee around the time of the general election in April, and it is an open secret that in the process, FSS Governor Lee’s relationship with the Presidential Office, excluding the President, turned completely sour,” adding, “In the aftermath, there is even talk that someone with a prosecutorial background should absolutely not be the next FSS governor.”
A legal professional with a prosecutorial background who has experience working in the financial sector pointed out, “The appointment of FSS Governor Lee, who is a former prosecutor, was primarily intended for the FSS to identify various corruptions in the financial sector and hand them over to investigative agencies like the prosecution to improve the system,” adding, “By intervening in too many issues under the title of FSS governor rather than sticking to that role, hasn’t he ended up making too many enemies?”