Financial Services Commission Chairman Kim Joo-hyun said on the 20th about the scale of win-win finance, “Financial holding companies will also refer to the windfall tax discussion in the National Assembly and consider how much the people are hoping for.”
Chairman Kim said this after the ‘Financial Services Commission, Financial Supervisory Service and Financial Holding Company Meeting’ held at the Bank Hall on the 20th, saying, “We have decided on a basic direction to ease the interest burden on small business owners and self-employed people.”
Regarding the ‘windfall tax’ legislation, he said, “If it is 100% good, is there any country that has not introduced it?” He said, “Rather than doing it through law, it can be done through discussions between industry and authorities, which is flexible and can be done while taking care of the details.”
The following is a Q&A with Chairman Kim and Financial Supervisory Service Director Lee Bok-hyun.
— Details on the scale and support measures of win-win financing.
▲(Chairman Kim) As today is the first meeting, we discussed the basic direction and precautions. He told the financial holding company that it must be at a level that the public can understand. It is expected that financial holding companies will also refer to the windfall tax discussion in the National Assembly and consider what the public is hoping for. The basic direction was set to alleviate the interest burden rather than create a fund. As discussions progress, an announcement will be made centered around the Korea Federation of Banks.
— Is support limited to the self-employed and small business owners?
▲ (Chairman Kim) During the coronavirus outbreak, self-employed people faced many difficulties due to business suspension. Although I received damage compensation, it was not enough and I suffered a lot of damage over a long period of time due to high prices and interest rates. There are many people in need, but aren’t the self-employed and small business owners the first class our society needs to pay attention to?
— Some point out that the attractiveness of foreign investment in the domestic banking industry may decrease.
▲(Chairman Kim) From the shareholders’ perspective, paying dividends is of course a good thing. However, as the banking industry is deeply rooted in Korea, I believe it has no future if the self-employed and small business owners collapse. From the perspective of sustainable operations, I think it is necessary to lower their interest costs.
— As the scale of coexistence increases, isn’t there a possibility of controversy over breach of trust centered on foreign shareholders?
▲ (Chairman Kim) Just as ESG (environmental, social responsibility, governance) management does not lead to breach of trust, I am not sure whether it leads to breach of trust.
▲ (Director Lee) I understand that maintaining small business owners and the self-employed without destroying them is beneficial to the bank, so they are considering this (possibility of breach of trust) in a balanced manner.
— Can foreign banks and internet banks also participate in the discussion?
▲ (Director Lee) (In the case of foreign banks) I understand that the Federation of Banks is listening to the opinions of the entire banking sector.
▲ (Chairman Kim) (Internet banks) can of course participate if the requirements are met. However, internet banks provide preferential treatment in terms of share structure, etc. Since we are asked to do something that the existing system could not do, we need to see if it can also play this role.
— There is also criticism that the windfall tax does not conform to market principles.
▲ (Chairman Kim) If the windfall tax was 100% good, wouldn’t all countries have introduced it? From the authorities’ perspective, they believe there is a lot of uncertainty in the financial environment. Who would have thought that Silicon Valley Bank (SVB) would fail a year or two ago? Rather than relying on laws, I think we can do this through discussions between industry and authorities while taking care of every detail.
— There are also predictions that the size of the windfall tax will reach 2 trillion won.
▲ (Chairman Kim) There was no discussion on the specific scale today. I think financial holding companies are aware of how much windfall tax the National Assembly wants.
— What is the difference between the excessive profits measures in the banking sector prepared by the party and the government and the windfall tax?
▲ (Chairman Kim) The windfall tax is a law that states that people must pay taxes above a certain level. I think this (banking sector’s excess profits measure) has the advantage of being able to discuss through dialogue how large it will be and to be able to do it flexibly.
— What is the schedule for future financial holding company meetings?
▲(Chairman Kim) We plan to meet with representatives of banks, securities companies, etc. at the end of the year.
— What will be the future of the head of the financial authorities?
▲ (Chairman Kim) Political office is something you do while you are in office and go when you are appointed.
▲ (Director Lee) Many major issues remain with the financial authorities.