"Maintaining Total Volume Control for the Time Being"... 'Loan Freeze' Expected to Continue into the New Year

Bank Sector Credit Loans Virtually 'Halted'
Secondary Financial Institutions Likely to Continue 'Balloon Effect'

Reference image of bank loan counter (Source=Yonhap News)

[Asia Economy Reporter Kim Hyo-jin] There is growing anticipation that the year-end loan crunch caused by the banking sector's stringent regulations will continue into next year. Accordingly, the 'balloon effect,' where bank loan demand shifts to secondary financial institutions, is also expected to persist.

According to the financial sector on the 26th, Yoon Seok-heon, Governor of the Financial Supervisory Service, stated at the year-end press meeting with reporters on the 23rd that regarding household loan regulations in the banking sector, "For the time being, we should maintain the current total volume control."

The banking sector is tightening loans by implementing high-intensity regulations, such as temporarily suspending major unsecured loan products, in response to orders from financial and supervisory authorities.

Governor Yoon diagnosed, "From the perspective of individual financial companies, they would want to provide loans. However, excessively high household debt poses risks that are not easily visible from the financial companies' standpoint." He also explained, "When all financial companies are combined, the increase is enormous," adding, "Since this could lead to systemic risk, the Financial Supervisory Service is monitoring the situation with heightened vigilance."

Major Banks Suspend Unsecured Loans One After Another

Due to pressure from the government and financial authorities, unsecured loans for office workers and others at banks have virtually come to a halt. Shinhan Bank has decided to suspend household unsecured loans, excluding low-income financial products through branches, until the end of the year, and Hana Bank is not offering its non-face-to-face unsecured loan product, 'Hana OneQ Unsecured Loan.'

KB Kookmin Bank has blocked all new household unsecured loans exceeding 20 million KRW. 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 major unsecured loan products, reducing limits, or raising interest rates.

Demand blocked in the banking sector appears to be rapidly flowing into secondary financial institutions. A representative from a savings bank explained, "Since the second half of the year, there has been a trend of expanding loan operations, which is absorbing demand in conjunction with the banking sector's loan regulations." According to financial authorities, household loans in the secondary financial sector 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.