Suspended, Suspended Again... Commercial Banks' Credit Loans Have Stopped (Comprehensive)

High-Intensity Loan Regulations Block Access for Employees and Others
Concerns Over Insolvency Due to Balloon Effect in Secondary Financial Institutions Like Savings Banks

Reference image (Source=Yonhap News)

[Asia Economy Reporters Kim Hyo-jin and Gong Byung-sun] Kim Dong-woo (44), who works at a mid-sized company in Seoul as the sole breadwinner, sought credit loan consultations this month at several commercial banks, including his main bank, to finance the remaining payment for an apartment purchase contract signed last month. However, he was dismayed to find out that the maximum loan amount available was only about 20 to 30 million KRW.

He had planned to cover the remaining payment by combining additional credit loans with previously borrowed living expenses, but recent tightened loan regulations have blocked this route. To complete the contract as scheduled, he must pay the balance within this month. Some banks have even closed credit loan products for salaried workers within days. Kim lamented, "I can't even pull together funds for investment, so to secure urgently needed money, I have no choice but to look into high-interest savings banks."

Due to increasingly stringent loan regulations in the banking sector, many real demand borrowers are struggling to secure emergency funds. The government calls this a 'pinpoint regulation' aimed at managing household loans and preventing the rapid influx of liquidity into real estate and stock markets. However, the scope and intensity of the regulations are so broad and severe that real demand borrowers unrelated to speculation or investment inevitably suffer, according to voices from the banking field.

On the 23rd, a representative from a major commercial bank in City A revealed, "We have seen a sharp increase in calls asking, 'Which bank should I go to? Please tell me how,' after customers found out that credit loan limits for living and operating funds were drastically reduced or loan services were suspended." The representative added, "Some customers even raise their voices, saying, 'We've had a main banking relationship for decades and have no credit issues, so how can you just refuse loans outright?'"

Some banks reportedly require partial repayment before extending overdraft accounts. For example, to extend a 30 million KRW overdraft account, about 20% must be repaid upfront. A representative from Bank B said, "Demand from high-income, high-credit professionals is not considered urgent cash needs," adding, "It is often difficult for banks as ordinary office workers face many inconveniences."

The loan thresholds at major commercial banks are rising almost daily. Shinhan Bank has decided to suspend all household credit loans except for low-income financial products through branches from today until the end of the year. Hana Bank will stop offering its non-face-to-face credit loan product 'Hana OneQ Credit Loan' from the 24th, with no set date for resumption. KB Kookmin Bank will block all new household credit loans exceeding 20 million KRW until the end of the year. Woori Bank, NH Nonghyup Bank, and internet-only banks such as KakaoBank and K Bank are also tightening sales of loan products excluding low-income financial products by suspending main credit loan products, reducing limits, or raising interest rates.

Loan Tightening Temporarily Slows Growth

As a result of these loan restrictions, the growth of credit loans in the banking sector has sharply slowed this month. As of the 22nd, the outstanding balance of credit loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 133.8234 trillion KRW. This is an increase of 130.9 billion KRW compared to the end of last month, which is almost negligible considering that the increase last month exceeded 4.8 trillion KRW compared to October.

There are concerns about a balloon effect, where demand shifts from banks to secondary financial institutions. A savings bank official explained, "Since the second half of the year, there has been a trend of expanding loan operations, which seems to be absorbing demand in conjunction with bank loan regulations." According to financial authorities, household loans from secondary financial institutions increased by 4.7 trillion KRW last month compared to the previous month, marking the largest increase since December 2016.

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