Politics · South Korea · 2 hrs ago
South Korea Plans Bank Ratings Tied to Inclusive Finance
South Korea’s financial regulator plans to rate banks on how well they support inclusive finance.
The proposed system would assess five areas, including lending and debt relief, as well as governance, social support and financial education.
Banks could earn credit for providing policy-backed and lower-cost loans, restructuring debt and helping customers reduce interest costs.
Ratings would range from S to C and be published each year to encourage banks to do more.
Banks with top scores could have their contributions to the Korea Inclusive Finance Agency reduced by up to 20%, while low-scoring banks could pay up to 20% more.
Some consumer-protection fines could also be cut by up to 10%, but not for past violations or breaches committed before a bank earns a strong rating.
This year’s results would be a trial, with financial incentives applying from next year and assessments planned to expand to non-bank lenders.
South Korea’s Financial Services Commission plans to rate banks on their inclusive finance performance.
The proposed system would cover five areas, including lending, debt adjustment and governance.
Banks could have their contributions to the Korea Inclusive Finance Agency increased or reduced by up to 20% based on their ratings.
Highly rated institutions could also receive reductions of up to 10% in fines for violations of the Financial Consumer Protection Act.
This year’s results would be used in a trial, with financial incentives and penalties applying from next year.
- Who
- South Korea’s Financial Services Commission plans to assess banks.
- What
- It plans to introduce ratings for banks’ inclusive finance performance, linked to contributions and possible fine reductions.
- When
- The system is planned to use this year’s performance for a trial, with financial incentives and penalties applying from next year.
- Where
- South Korea.
- Why
- The commission aims to encourage financial institutions to expand and sustain inclusive finance.
This story does not have two clearly opposing sides.
The commission plans to assess banks using this year’s performance in a trial.
The commission plans to apply incentives and penalties based on performance.
The commission plans to extend assessments to second-tier financial institutions.
- Assessment areas
- Governance 10%; funding supply 35%; debt adjustment 35%; social consideration 10%; non-financial services 10%
- Contribution adjustment
- Up to 20% increase or reduction
- Fine reduction
- Up to 10% for qualifying institutions
- Trial cohort
- First-tier banks, including commercial, regional and internet-only banks
- Rating bands
- S, A, B and C
1 source
What people are saying
The supply performance of inclusive finance products may be similar among banks, so the actual differences between financial companies may ultimately be determined by governance, the qualitative assessment item.