S. Korean banks' non-interest income excessive: report

By Park Bo-ram
SEOUL, June 11 (Yonhap) -- The excessive reliance of South Korean banks on
non-interest income could threaten the banking system, a report said Thursday,
urging them to beef up efforts to manage risks from non-interest business.

The ratio of banks' non-interest income to their total revenue spiked to about 80
percent in 2008 from roughly 30 percent in 2000 because of a jump in derivatives
trading, according to the report by a researcher at the Bank of Korea.
"Local lenders' dependence on non-interest income has soared to an excessive
level, which may pose systemic risk," Kim Ki-ho said in the report.
The central bank researcher defined systemic risk as the possibility that a
bank's bankruptcy may lead to the failure of other lenders.
Eased regulations and heated competition have driven local lenders to scurry to
pursue fee and commission income from credit card issuance or transactions of
volatile derivatives products, he said.
"Given such risks, lenders need to step up their management of potential risk
from non-interest business as deregulation and increasing derivatives trading by
banks are expected to further raise the ratio of non-interest income," Kim said.

In February, South Korea conducted a sweeping deregulation of the nation's
underdeveloped capital market by tearing down barriers separating stock
brokerage, futures trading and asset management.
pbr@yna.co.kr
(END)