Commercial Banks Halt Personal Loans... Internet Banks Also Contemplate Joining (Comprehensive)

K Bank Considers Raising Interest Rates on Unsecured Loans
Kakao Bank Cautious About Additional Loan Regulations
Concerns Over Balloon Effect as Loan Demand Pours Into Internet Banks

[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] Internet-only banks, which have rapidly expanded thanks to the spread of non-face-to-face transaction culture, are struggling over additional regulations aimed at 'tightening loans.' While aggressive loan marketing is inevitable to maintain high growth, pressure from financial authorities and concerns about potential insolvency cannot be ignored.

Moreover, as pressure on commercial banks to manage loans intensifies, there is a concern that a balloon effect could occur, where loan demand shifts to internet banks with relatively wider operational scope, potentially increasing the risk of insolvency in the future.

According to the banking sector on the 16th, K-Bank is currently reviewing measures to curb unsecured loans. A K-Bank official said, "Since raising interest rates last September, we have been discussing related matters in line with market conditions." It is reported that K-Bank is focusing more on raising interest rates rather than reducing limits to maintain overall loan policies. K-Bank's loan balance at the end of last month was 2.71 trillion KRW, an increase of 1.33 trillion KRW compared to the end of January this year.

The rapid increase in loan volume is the same for KakaoBank. KakaoBank's loan balance at the end of last month was 19.9441 trillion KRW, up 78.09 billion KRW in one month. Unsecured loans also increased by 550 billion KRW to 15.75 trillion KRW last month compared to the previous month. KakaoBank underwent a preliminary inspection by the Financial Supervisory Service for the first time since its establishment on October 15, and a full-scale risk management capability evaluation is scheduled to begin next year, making soundness management inevitable. Nevertheless, KakaoBank is cautious about additional loan regulations. On the 3rd, it already raised interest rates on salaried workers' unsecured loans and overdraft accounts by 0.1 percentage points and 0.25 percentage points, respectively. A KakaoBank official said, "If there is a movement of loan demand surging, we will review it internally," adding, "Since we raised rates recently, it is difficult to implement further regulations."

The situation is similar for Naver Financial, which is accelerating its entry into the financial industry. On the 2nd, Naver Financial, together with Mirae Asset Capital, started loan services targeting small business owners registered on its shopping channel. Although it started with a low interest rate of 3.2% per annum, it is explained that it can move flexibly as needed. An industry insider said, "It is still early, so it is difficult to specify the current situation, but interest rates and total volume restrictions may change depending on policies."

Concerns Over Balloon Effect as Loan Demand Shifts

As pressure to manage loans on commercial banks intensifies, there is speculation that if internet banks maintain relatively more leeway, loan demand could suddenly flood into internet banks.

Professor Kim Dae-jong of the Department of Business Administration at Sejong University said, "The balloon effect, where alternatives are sought when loans are not available in the banking sector, naturally occurs," adding, "Since the government is pressuring banks to curb loan growth, demand will flow significantly into internet banks, which have relatively lower thresholds."

Professor Kim also added, "The average loan interest rate at commercial banks is about 3.5%, but internet banks sometimes have higher rates, raising concerns about insolvency."

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