From left, headquarters of Shinhan Financial Group, Woori Financial Group and KB Financial Group in Seoul / Courtesy of each financial group

Korea's major financial groups have pointed to the government's push for "inclusive finance" as a potential management risk in their U.S. regulatory filings, according to industry officials Thursday.

The remarks, which were not included in domestic regulatory disclosures, appeared to reflect concerns within the industry over policy-driven lending initiatives and their potential impact on profitability and asset quality.

According to industry officials, KB Financial Group, Shinhan Financial Group and Woori Financial Group recently submitted annual reports for fiscal year 2025 to the U.S. Securities and Exchange Commission (SEC), as their American depositary receipts (ADRs) are listed on the New York Stock Exchange. Hana Financial Group was excluded, as it does not have ADRs listed in the United States.

In the filings, the three financial groups cited government-led inclusive finance initiatives under the "risk factors" section, warning that such measures could increase credit risks, pressure margins and weaken asset quality.

"The Korean government may in the future request financial institutions in Korea, us included, to make investments in or provide other forms of financial support to particular sectors of the Korean economy as a matter of policy," Woori's report read.

"Although these requests may at times align with our own strategies and policies, such initiatives may also require us to provide financial support to sectors which we would not otherwise support, as a result of which we may incur unintended costs or losses," the report added, noting that the group recently announced plans to invest up to 7 trillion won ($4.7 billion) in inclusive finance efforts over the next five years.

KB Financial Group said new regulations related to the government's inclusive finance initiatives could "reduce our profit margins, limit our operational flexibility and increase competition, which in turn could have a materially adverse effect on our operations and financial condition."

Shinhan Financial Group made similar remarks, saying government-led inclusive finance initiatives could require changes to business practices that may ultimately increase delinquency risks and weaken asset quality.

Notably, references to inclusive and productive finance were newly added to this year’s SEC filings as they did not appear in last year's reports. The comments were also absent from annual business reports submitted to Korea’s Financial Supervisory Service.

Source: Korea Times News