Financial Authorities to Investigate Whether Surge in Credit Loans Is Due to Banks' Performance Competition (Comprehensive)

"Proactive Management of Excessive Credit Loans"

Son Byung-du, Vice Chairman of the Financial Services Commission / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kim Hyo-jin] Financial authorities plan to examine whether excessive performance competition among banks is behind the recent surge in unsecured loans.

Son Byung-doo, Vice Chairman of the Financial Services Commission, stated during a video meeting of the Financial Risk Response Team on the morning of the 8th, "We will also look into whether the recent increase in unsecured loans is due to competition among banks for loan performance."

As of the end of last month, the outstanding balance of personal unsecured loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 124.2747 trillion won, an increase of 4.0705 trillion won (3.38%) compared to the end of the previous month. The growth rate rose by more than 1 percentage point compared to the previous month (2.28%). This is the largest monthly increase on record. The increase in personal unsecured loans at the five major banks fell from the 2 trillion won range in March to about 500 billion won in April but has since shown a steep upward trend again.

The trends of 'debt investment'?borrowing to invest in stocks and other assets backed by an ultra-low interest rate environment?and 'Youngkkeun'?people in their 30s and 40s pooling all available loans and assets to buy a home?are interpreted to have broadly influenced this.

Vice Chairman Son said, "We will continue proactive management efforts to ensure that excessive unsecured loans do not become a risk factor for our economy." Accordingly, financial authorities are inspecting whether unsecured loans are properly reflected when calculating the Debt Service Ratio (DSR) for banks and savings banks.

Meanwhile, Vice Chairman Son announced, "We will supplement the small business owners' second financial support program, including adjusting limits, to make financial support more effective."

He added, "We will closely coordinate with related ministries to thoroughly understand the damages and funding needs of small business owners," and urged the financial sector, saying, "Please ensure that the extension of loan maturities and interest payment deferrals for small business owners and SMEs are implemented smoothly on the ground."

The execution amount of the second emergency loan for small business owners by KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup, and IBK Industrial Bank currently stands at about 590 billion won, which is relatively low. The second loan allows small business owners to receive up to 10 million won per person (with a 5-year maturity). Recently, banks have been striving to activate usage by lowering interest rates.

Within the financial sector, there are calls to improve accessibility for small business owners by allowing overlapping applications for the first and second rounds of loans and increasing loan limits.

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