Financial Authorities to Further Ease Loan Restrictions for Self-Employed Until Next Year

Extension of Loan-to-Deposit Ratio Weight Relief

[Asia Economy Reporter Kim Hyo-jin] Financial authorities have decided to extend the measure to ease the weighted loan-to-deposit ratio (LDR) for individual business owners in the banking sector to support smooth lending for self-employed individuals struggling due to the novel coronavirus disease (COVID-19).

According to financial authorities on the 7th, the Financial Services Commission announced a change to the Banking Supervision Regulations containing this content, which was notified from the 2nd of this month until August.

Accordingly, until the end of June next year, the weighted LDR for banks' individual business loans will remain lowered from 100% to 85%, and from July to December, a 95% rate will be applied.

The financial authorities decided to apply the eased weighted LDR, as a follow-up measure to the 'Financial Regulation Flexibility Plan' for COVID-19 related financial support, until the end of this year and have been applying it retroactively from loans handled in January.

The LDR is the ratio of loan amount to deposit amount, and banks cannot exceed 100%. When the weighted LDR decreases, the loan amount can be accounted for less in the LDR calculation, thereby increasing the capacity for new loans accordingly.

As of the end of last month, the outstanding balance of individual business loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?was 269.4065 trillion won, an increase of 2.6877 trillion won compared to the end of October (266.7188 trillion won) and an increase of 29.0276 trillion won compared to the end of January this year (240.3789 trillion won).

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