While President Yoon Seok-yeol’s recent designation of banks as public goods has emerged as a hot topic, banking stocks have turned on the blue light all at once. It is interpreted that this has led to worsening investor sentiment as the financial authorities are expected to come up with countermeasures to prevent the money feast in the banking sector.
According to the Korea Exchange on the 15th, the previous day, Hana Financial Group finished trading at 46,850 won, down 2,150 won (4.39%). In addition, JB Financial Group (4.34%), KB Financial Group (KS:) (4.16%), Shinhan Financial Group (3.31%), Woori Financial Group (2.78%), DGB Financial Group (2.66%) and BNK Financial Group (1.42%) also closed down.
The reason why stock prices of banking stocks fell all at once on this day is that President Seok-Yeol Yoon mentioned that banks are public goods the previous day, and then criticized banks for performance bonuses and severance pay, calling them a feast of money.
On the 13th, President Yoon Seok-yeol said at a meeting of senior secretaries, “The people are suffering from high interest rates at banks.” “Since banks have a public property nature, we will give consideration to the people, the self-employed, and small business owners who have difficulty earning profits so that they can return to the so-called win-win finance benefits, and in the future It is appropriate to use it to build up a solid reserve in preparation for financial market instability,” he said.
Then, President Yoon ordered, “The Financial Services Commission should come up with relevant measures so that the people do not feel uncomfortable due to the bank’s money feast.”
The financial authorities are also expected to focus on strengthening win-win finance with banks. In addition, for the soundness of banks, stress tests will be conducted on a regular basis to increase capital and increase provisioning. In the first half of the year, a system requiring additional accumulation of special loan loss reserves will also be introduced if it is judged that the bank’s loan loss provisions and reserves are insufficient.
In the market, there are concerns that if banks set aside additional reserves and expand social contribution funds, it might lead to a reduction in dividends as well as a decrease in net profit.
Choi Jeong-wook, a researcher at Hana Securities, said, “Following the government’s remarks that ‘banks are public goods’, the Financial Supervisory Service re-emphasized the public role of banks, and regulatory concerns such as the notice of the adequacy of governance continued. The size of bad debt reserve can also be a variable, but an increase in the shareholder return ratio will trigger foreign buying in the mid- to long-term and act as a factor in increasing the multiple,” he explained.
