Yoon Seok-heon: "Loan Volume Control to Be Maintained for Now... Regulatory Intervention Not Excessive"

"Excessive Increase in Household Debt May Trigger Systemic Risk"
"Dividends Can Be Accumulated and Paid Later, Can't They?"

Yoon Seok-heon, Governor of the Financial Supervisory Service

[Asia Economy Reporter Kim Hyo-jin] Yoon Seok-heon, Governor of the Financial Supervisory Service, stated on the 23rd regarding the recent stringent household loan regulations in the banking sector, "For the time being, we should maintain the current total volume control."

Governor Yoon made this remark during a year-end meeting with the press corps held via video to prevent the spread of the novel coronavirus infection (COVID-19), saying, "In the second half of this year, especially in November, the increase in household loans was very steep, mainly in unsecured loans."

The banking sector is tightening loans by implementing high-intensity regulations such as temporarily suspending major unsecured loan products in accordance with the orders of financial and supervisory authorities.

Governor Yoon diagnosed, "From the perspective of individual financial companies, they would want to provide loans, but excessively high household debt poses risks that are not easily visible to financial companies."

He also explained, "When all financial companies are gathered, the increase is enormous," adding, "Since this could lead to systemic risk, the Financial Supervisory Service is monitoring the situation with heightened vigilance."

Regarding criticisms from inside and outside the banking sector that the authorities' intervention might be excessive, Governor Yoon said, "Considering the level of household debt, it is not excessive," but added, "However, I fully understand the need for capital supply to sectors like self-employed businesses, and we will apply this aspect to the direction of household loan supervision."

Concerning the Financial Supervisory Service's recommendation to financial holding companies to refrain from dividends in preparation for potential COVID-19-related defaults, Governor Yoon expressed, "Since the situation is risky due to COVID-19, it would be better to accumulate capital now and pay dividends later."

In response to the criticism that some overseas countries such as the United States and the United Kingdom have allowed higher dividends, he said, "This seems to be a misunderstanding," pointing out, "We are asking to slightly lower dividends that were previously high, whereas in Europe, the UK, and the US, dividends were very low, so they have eased restrictions a bit."

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