South Korea’s Financial Supervisory Service is warning of a crisis, similar to the one that rattled the country in 2003, from the growing competition in the country’s credit card market.
Agency Gov. Kim Jong-chang issued the warning during a meeting with executives in charge of the country’s card issuers, according to a spokesperson for the service.
There is a high probability that credit card companies will engage in reckless business expansion without taking into account risk management, he adds.
Jong-chang warned the leaders of Shinhan Card Co. Ltd., KB Kookmin Co. Ltd., BC Card Co. Ltd., Samsung Card Co. Ltd., Lotte Card Co. Ltd., Hana-SK Card Ltd. and Hyundai Cards Ltd. that the regulator will hand down stern disciplinary measures against any irregular practices used to attract customers. In particular, he expressed dismay over alleged illegal methods some were using, including street promotions and slashed commissions, to attract customers in pursuit of their expansion targets.
Kim also is worried about the rapidly growing and higher-risk loan services among card issuers, such as revolving credit programs. To make up for a decline in card issuance, they are depending more heavily on revolving credit programs, according to Kim
Revolving loans grew from 5.1 trillion won (US$4.56 billion or 3.28 billion euros) at the end of 2009 to 5.5 trillion won at the end of last year, according to data from the Financial Supervisory Service.
The combined assets of the country’s card issuers reached 75.6 trillion won at the end of 2010, close to the critical level of 78.9 trillion won at the end of 2003, when the last crisis occurred, according to the regulator. In addition, the sales force employed by the issuers reached 50,000 as of the end of December, up 30% from 35,000 a year earlier.
