This year’s ‘Global Competitiveness Report“ released by the World Economic Forum(WEF) showed Korea ranked 80th among 138 countries in the world. The rating is even behind Uganda, However, from my practical experience, Korea can not be viewed far lower than Japan and Taiwan. The credit ratings of our banks by a global credit rating company is A+ and the availability of financial service and the price propriety of our banking industry do not deserve ratings below 80ths. After the IMF crisis, it was foreseen that the profitability of banks would improve greatly. Under such speculation, foreign banks moved into Korea in 2004. Unlike such analysis, the profitability of the financial industry ranked 83rd with 2~4% earnings due to the factors such as low interest rates, high cost structure, one term of CEO, bureaucratized and politicized financial system, excessive dependence on the domestic market and etc. Furthermore, digitalization creates new challenges and risks to the traditional financial model.

In order to improve the profitability of banks, broadening non interest revenue, expanding into overseas, securing reasonable prices, improving efficiency, developing the symbiotic relationship with Fintech are needed. For the development of the financial industry, improving banking governance structure, establishing the virtuous circle of the financial services, switching to the Universal Banking, reforming regulations for the digitalization era.

To become the financial hub of Northeast Asia, we need to break away from social conventions, to properly adjust our viewpoint of foreign financial institutions to better fit the globalization, and to free inflows and outflows of funds.

Although the households debts are very high, it is not as risky as the public think because the average LTV is stable as 54%, the households assets are greater than households debts, the high 4.5 income brackets are 70%, loans with fixed interest rates and redemption by installments are 40%. However, we need to be cautious about the blind sight where LTV and DTI do not apply, the rapid growth of increase of households debts, and the weakening of capital flexibility of multiple debtors, the increase of debts of the sole proprietors in the age of 50~60 years old.