Korea needs an environment conducive to investment and job growth, said Michael Hellbeck, executive vice president/COO & head of regulatory affairs at Standard Chartered Korea, in a paper he presented to the 6th Asia-Pacific Financial Forum jointly hosted by the Aju News Corporation and the Wenweipo Media Group in Hong Kong. The three-day forum ends Friday.
In his paper, titled "Observations on Domestic Financial Policy Issues in Korean Banking Industry," Hellbeck described as "bleak" the outlook for Korean banking sector.
This is because of high competition across all segments of consumer banking and irrational pricing of loans and deposits, and because mortage loan rates and margines are at historic lows, he said.
Hellbeck forecast that banking profitability will decline further.
Banks are burdened with increasing cost for "social contributions" and exposed to high interest rate market risk from "conforming loans," he said.
In addition, shareholder returns are declining, he said. "Korean banks' return on equity (ROE) is lowest in non-Japan Asia and banks are not earning their cost of equity."
As to the role of Korean banks, Hellbeck emphasized that banks should not be viewed as a "public utility" but as an industry in its own rights.
"Only profitable banks will expand and create more jobs, which is the most important social responsibility," he said.
Addressing key concerns of foreign investors, Hellbeck called for swift implementation of FTA commitments; predictable, transparent and consistent policies; adherence to market-based principles; deliberative policy making/prior consultations with market; and labor market flexibility.
reporter
Park Sae-jin
swatchsjp@ajunews.com