Non-Bank Financial Sector Credit Loans Increase by 2.1 Trillion Won in 3 Months... Financial Authorities "Conducting Reality Check"

[Asia Economy Reporter Jo Gang-wook] As credit loans have significantly increased in the secondary financial sector, including savings banks, financial authorities have launched an on-site inspection. Credit loans in the secondary financial sector have surged by more than 2 trillion won over the past three months.

According to financial authorities on the 13th, household loans in the secondary financial sector increased by 500 billion won, 1.8 trillion won, and 2.2 trillion won each month from June to August. This amounts to a total increase of 4.5 trillion won over three months. This contrasts sharply with the same period last year, when loans decreased by 300 billion won, 100 billion won, and 900 billion won each month from June to August.

By category, the increase in other loans including credit loans (600 billion won in June, 1.5 trillion won in July, 2 trillion won in August) was larger than the increase in mortgage loans (less than 100 billion won in June, 300 billion won in July, 200 billion won in August).

Other loans include card loans, cash services, and insurance contract loans. Looking at credit loans alone, they increased by 400 billion won, 800 billion won, and 900 billion won each month from June to August. The total increase over the past three months reached 2.1 trillion won.

Given this situation, the Financial Services Commission and the Financial Supervisory Service are analyzing the causes of the increase in credit loans in the secondary financial sector, focusing on specialized credit finance companies (credit finance companies) such as capital and card companies, as well as savings banks.

They plan to receive basic data from each financial company and conduct an in-depth review of trends in credit loan increases, average loan amounts per person, and average loan amounts by borrower credit rating.

Financial authorities view the recent increase in credit loans as a result of a complex combination of increased demand for living and business funds due to the novel coronavirus disease (COVID-19) and the inflow of funds into asset markets such as stocks and real estate.

The financial authorities plan to strengthen management and supervision of illicit loans that circumvent real estate regulations such as the loan-to-value (LTV) ratio limit.

Recently, when some savings banks and credit finance companies were found to have provided loans exceeding the LTV limit through loan sharks, administrative guidance was issued to apply LTV regulations to mortgage-backed pledge loans as well.

Some speculate that financial authorities may consider lowering the borrower’s total debt service ratio (DSR) limit, currently 60% for non-bank sectors (40% for banks), or expanding the scope of its application.

A financial authority official said, "We first need to verify the usage of the increased loans," adding, "Based on this, we will prepare measures as necessary."

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