Key Charts - Size and Structure
South Korea’s Balancing Act
- The Bank of Korea (BOK) has cut its key policy rate by 25 basis points to 2.25%, which is squeezing bank margins.
- Other government policies are also cutting into bank profits, as can be seen through two indicators of profitability: lending rates which have dipped, and loan growth rates that are sluggish between 5.3 to 6.2% YoY.
- These issues are cyclical, but they still point to a deeper problem, which is the difficulty of balancing prudential regulation with having a more competitive banking sector
Sources: Bank of Korea, Bloomberg, Milken Institute.