South Korea’s chief financial regulator urges banks to reduce interest income dependence: report

Lee Bok-hyun said the FSS is looking for ways to encourage lenders to diversify income streams.

South Korea’s financial regulator has urged banks to reduce dependence on interest income and diversify profit sources amidst criticism of lenders hitting record profits due to interest rates, according to a report by Yonhap News Agency.

Lee Bok-hyun, head of the Financial Supervisory Service (FSS), made the remark in a meeting with foreign investors in Seoul.

Criticism has been mounting against South Korean banks for them reaping record profits from interest income and handing out hefty bonuses to employees. Meanwhile, people are suffering from high borrowing costs caused by the central banks' monetary tightening, Yonhap reports.

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"They have been complacent about the oligopolistic structure, reaping more than 80 percent of their earnings from interest income, and enjoyed the benefit by themselves. I think it is a great cause for concern as it may weaken the growth potential of the sector," Lee said.

Lee added that banks may have a hard time gaining an edge in the global market if they stay reliant on interest rates.

Lee shared that the FSS is also currently exploring "various ways" to encourage banks’ move to diversification. "By doing so, we believe that Korea's banking industry will be able to get more competitive and efficient, which will make the Korean financial markets more attractive to investors," he said.