'Real Estate Full-Scale Battle' Financial Supervisory Service Joins... Focused Crackdown on Loan Misuse

Thorough Inspection of Financial Companies' Loan Regulation Compliance
"Strict Measures for Violations" Ordered by Financial Supervisory Service Chief

Yoon Seok-heon, Governor of the Financial Supervisory Service (Photo by Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] Financial supervisory authorities have decided to intensively crack down on whether financial companies comply with real estate loan regulations. This aims to block the practice of obtaining loans for other purposes and using them in housing transactions, thereby supporting the government's 'full-scale real estate war.'

It is expected that if the 'real estate market supervisory organization' mentioned by President Moon Jae-in is established, a comprehensive surveillance and management system combining multi-faceted regulatory functions at the whole-government level and frontline financial supervision functions will be created.

According to the financial sector on the 12th, the Financial Supervisory Service (FSS) will soon begin a focused inspection on cases of misuse of loan funds beyond their intended purposes, centered on the Household Credit Analysis Team of the Bank Supervision Bureau. The FSS plans to make inspection activities permanent by partially adjusting existing tasks. In particular, the FSS intends to closely examine whether financial companies strictly comply with regulations preventing corporate loans or loans to self-employed individuals from being used for housing transactions or other purposes.

Corporations or self-employed individuals must disclose the purpose when obtaining loans from financial companies. If the loan is used differently from the declared purpose, the loan will be recalled. According to the standard loan transaction terms of each financial sector, using loan funds for purposes other than those stated constitutes a cause for loss of the benefit of the term. Examples include obtaining a self-employed loan secured by a house and using it to purchase a house for oneself or family members.

The FSS plans to further strengthen its cooperation system with the 'Real Estate Market Illegal Activities Response Team,' operated under the Ministry of Land, Infrastructure and Transport, to enhance supervisory efficiency. The FSS will also conduct inspections on cases of disguised loans through private lending businesses.

In this regard, FSS Governor Yoon Seok-heon pointed out at an executive meeting the day before that signs of an increase in household loans are re-emerging due to recent overheating in the real estate market. He instructed to strengthen inspections on financial companies' compliance with loan regulations and to take strict measures if violations are detected.

With Signs of Household Loan Expansion, Governor Yoon Seok-heon Calls for "Thorough Supervision"
Surveillance Structure Expected to Strengthen Alongside 'Real Estate Supervisory Organization'

The increase in household loans, which was 2.2 trillion won in January this year, rose to 9.5 trillion won in February and 9.1 trillion won in March, then dropped to 3 trillion won and 3.9 trillion won in April and May respectively, before jumping again to 8.7 trillion won in June.

Before the full-scale crackdown, the FSS plans to encourage internal self-inspections of loan screening systems through discussions with key financial company practitioners and sending official letters. A representative from a major commercial bank said, "Measures such as strengthening manuals for screening procedures, loan execution, and overall post-management are expected to follow."

Some voices express concerns about the overexpansion of financial company supervisory functions. A financial sector official said, "If the real estate supervisory organization mentioned by the President is newly established, the policy cooperation structure with the financial sector will become stronger," adding, "It is necessary to be cautious about the financial supervisory authorities' related supervisory functions expanding beyond what is necessary."

President Moon stated at the senior secretaries and aides meeting on the 10th that he intends to consider establishing a real estate supervisory organization to enhance the effectiveness of real estate measures. Options such as expanding the Ministry of Land, Infrastructure and Transport's real estate response team into a separate organization are being discussed.

This content was produced with the assistance of AI translation services.