Moody's sees limited impact on banks from Korea's 'inclusive finance' push

The government's push to expand lending to small businesses and vulnerable borrowers is unlikely to have a significant impact on banks' profitability and capital adequacy, a Moody's analyst said Tuesday, as the agency maintained a stable outlook on Korea's banking sector. "Considering banks' responses and the current operating environment, the overall impact of the inclusive finance policy agenda does not appear to be as meaningful as we initially expected," Arlene Sohn, assistant vice president and analyst at Moody's Ratings, said during a media briefing in Seoul. Sohn said Moody's had initially expected the government's inclusive finance and productive finance initiatives to put downward pressure on banks' capital positions by increasing exposure to higher-risk corporate loans and lower-credit borrowers. "As banks move away from mortgage-focused business models toward corporate lending, particularly to small businesses and lower-credit borrowers, we expected average risk weights to rise and create downward pressure on capital," Sohn said. "We also expected profitability to weaken as l

Original source: Korea Times