Financial Changes from the New Year... COVID-19 Support and Legal Maximum Interest Rate Reduction

On the 23rd, the second loan limit for small business owners struggling due to the COVID-19 crisis will be increased to 20 million won. Small business owners who have already received the first loan can also apply for additional loans. According to the Financial Services Commission, the government has expanded the support limit and scope through the 'Expansion and Reorganization of the Small Business Financial Support Program' to provide up to 20 million won in additional support to small business owners. The photo shows a small business owner receiving loan consultation at Shinhan Bank in Seoul on the same day. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kangwook Cho] The guarantee fees and interest rates for the second financial support program for small business owners will be reduced, and a special program (KRW 3 trillion) will be launched to provide separate support for small business owners renting premises in restricted business sectors.

To activate investment by general investors, the allocation for general subscription holders during initial public offerings will be increased by 5 percentage points. Savings banks, securities firms, and card companies will also participate in open banking, and inquiry fees will be reduced to one-third of the previous level.

The statutory maximum interest rate will be lowered from 24% per annum to 20% per annum, and the 4th generation indemnity health insurance will be launched to enhance fairness in insurance premium burdens and control excessive medical treatment.

The Financial Services Commission announced on the 30th the "Financial System Changes Starting from the New Year 2021," which includes these details.

Below is a summary of the financial system changes.

▲ Support for Small Business Owners = Guarantee fees and interest rates for the second financial support program for small business owners will be reduced, and a special program (KRW 3 trillion) for separate support of small business owners renting premises in restricted business sectors will be launched. (From January 18, 2021)

▲ Support for Good Landlords = ‘Good landlords’ will be temporarily included as beneficiaries of the second small business program and the Haenaeri loan (Korea Development Bank). (From December 2020 to June 2021)

▲ Support for SMEs = Factoring without repayment responsibility of the selling company will be introduced to facilitate smooth funding and prevent chain bankruptcies. (From January 4, 2021)

▲ Expansion of Repayment Deferral = Debtors who temporarily experience reduced repayment ability (due to unemployment, business closure, etc.) can defer repayment regardless of the delinquency period. (From December 1, 2020)

▲ Improvement in IPO Allocation = To activate investment by general investors, the allocation for general subscription holders during IPOs will be increased by 5 percentage points (up to 30%). (From January 2021)

▲ Platform Utilization = Banks will be allowed to operate platform-based businesses, enabling new services such as food ordering and payment through bank apps. (From July 2021)

▲ Expansion of Open Banking = Savings banks, securities firms, and card companies will also participate in open banking, and inquiry fees will be reduced to one-third of the previous level. (First half of 2021)

▲ ISA System Improvement = The ISA system will be made permanent, income requirements will be abolished, and investment in listed stocks through ISA will be allowed. (First quarter of 2021)

▲ Increase in Crowdfunding Limit = The annual limit for stock issuance through crowdfunding will be increased from KRW 1.5 billion to KRW 3 billion. (First half of 2021)

▲ Healthcare Services = Not only insurance policyholders but also the general public will be able to enjoy healthcare services provided by insurance companies. (From January 1, 2021)

▲ Reduction of Statutory Maximum Interest Rate = The statutory maximum interest rate will be lowered from 24% to 20% per annum, easing the high-interest burden on low-income people. (Second half of 2021, after revision of the Enforcement Decree of the Loan Business Act)

▲ Enhancement of Financial Consumer Rights = With the enforcement of the Financial Consumer Protection Act, consumers can exercise rights such as withdrawal of subscription, cancellation of illegal contracts, and access to information. (From March 25, 2021)

▲ Reporting of Financial Fraud = Victims of telecommunication financial fraud can immediately report phone numbers and reception times used in the fraud at the time of applying for damage relief. (From November 20, 2020)

▲ Support for Return of Erroneous Remittances = A return support system will be introduced to allow easy and low-cost recovery of money mistakenly sent. (From July 2021)

▲ Strengthening Information Security = An information security evaluation system and guidelines will be introduced to systematically inspect and understand the information security status of financial companies. (From February 4, 2021)

▲ Introduction of Information Utilization Consent Grading System = Consent forms for information use will be graded based on the degree of privacy infringement and consumer benefits. (From February 4, 2021)

▲ Reform of Indemnity Health Insurance = The 4th generation indemnity health insurance will be launched to enhance fairness in premium burdens and control excessive medical treatment. (From July 1, 2021, planned)

▲ Improvement of Insurance Contract Recruitment Fees = To improve the excessive advance payment of recruitment fees, a cap on first-year recruitment fees and a system for installment payment of fees will be introduced. (From January 1, 2021)

▲ Deregulation of Small Amount Short-Term Insurance = For insurance companies dealing only with small amount short-term insurance, the capital requirement will be relaxed from KRW 30 billion to KRW 1 billion or more. (From June 9, 2021)

▲ Deregulation of Credit Union Loans = For loans within a region (10 areas), the restriction on non-member loans (not exceeding one-third of total loans) will not apply. (From January 1, 2021)

▲ Quorum for Auditor Appointment Committee = Considering difficulties in forming the auditor appointment committee, the minimum quorum will be reduced from 7 to 5 members. (From January 2021)

▲ Financial Conglomerate Supervision Act = A law to manage and supervise financial conglomerates regarding internal control, risk management, soundness management, and disclosure will be enforced. (Second half of 2021)

▲ Restructuring of Microfinance Education Loans = Microfinance will also support private education expenses, and interest rates on education loans for vulnerable groups will be reduced (from 4.5% to 2-3%). (From February 2021)

▲ Strengthening Support for Unemployed Youth = The special debt adjustment target for unemployed youth will be expanded (from under 30 years old to under 34 years old), and the repayment deferral period will be extended (from up to 4 years to up to 5 years). (From December 2020)

▲ Improvement of Housing Pension = Pensions that automatically transfer pension rights to spouses upon the subscriber’s death will be allowed, and seizure-protection accounts will be introduced. (From June 9, 2021)

▲ Reporting of Virtual Asset Operators = Virtual asset operators must report to the Financial Intelligence Unit and will be supervised and inspected for compliance with anti-money laundering obligations under the Specific Financial Information Act. (From March 25, 2021)

▲ Disclosure of Property Benefits = When banks disclose property benefits provided to specific users (over KRW 1 billion), both amounts already provided and amounts planned to be provided in the future will be included. (From January 1, 2021)

▲ Restriction on Excessive Benefit Provision = To prevent excessive competition among credit card companies, providing excessive economic benefits to corporate members will be prohibited. (From July 1, 2021)

▲ Activation of Financial Education = Policy low-income finance users who complete education and consulting at the Korea Inclusive Finance Agency will receive preferential interest rates of about 0.1 percentage points. (From June 2021)

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