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

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Sources: Bank of Korea, Bloomberg, Milken Institute.

South Korea’s Balancing Act

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