Loan thaw..."Another blockage?" Massive demand expected to surge

Major Commercial Banks Resume Key Loan Products
Loan Growth Significantly Slows After December Freeze
High-Income and Professionals' Thresholds Remain Unchanged

[Asia Economy Reporter Kim Hyo-jin] As banks that had raised lending standards until the end of last year due to tightening by financial authorities are beginning to ease restrictions one after another, it is expected that loan demand from office workers and others will flood in for the time being. This is due to concerns that the loan market may shrink again depending on additional management measures the government will soon announce. There is a forecast that movements to gather funds before regulations may appear in line with this year's expected rise in the housing and stock markets.

According to the banking sector on the 4th, commercial banks that have implemented high-intensity loan regulations such as suspending major loan products from September last year until the end of the year are resuming loans one after another in the new year. KB Kookmin Bank and Shinhan Bank, which temporarily suspended loans exceeding 20 million won and the 'Solpyeonhan Office Worker Credit Loan' last month, resumed product sales from this day.

Woori Bank plans to resume sales of its main loan product, 'Woori WON(WON) Office Worker Loan,' within this month. Internet-only bank KakaoBank also restarted sales of its previously suspended overdraft credit loans on the 1st. Hana Bank is currently coordinating the timing to resume handling the 'Hana One Q Credit Loan.' NH Nonghyup Bank is slightly lowering the threshold by raising the preferential interest rate limits for household loans, which had been reduced last year.

However, banks plan to generally maintain the loan management policy targeting high-income and professional workers. This is due to the government's 'pinpoint regulation' policy aimed at preventing large loans executed for these groups from being excessively concentrated on real estate and stock investments rather than livelihood.

As regulations on actual loan demanders are thus relaxed, those who had difficulty securing funds due to the loan freeze at the end of last year are expected to accelerate their steps for the time being. In particular, as the government is set to announce an advanced household loan management plan soon, it is anticipated that movements to secure as much funding as possible will intensify amid concerns that loan access may tighten again.

Last year, amid the craze for debt-financed investment (Bitt-u) and pulling together all resources (Yeongkkeul), credit loans from the five major banks surged from 124.2747 trillion won at the end of August to 126.3868 trillion won at the end of November. However, with loan access blocked in December, the increase sharply slowed to 133.8234 trillion won as of the 21st.

Market Uncertainty May Encourage Loans

An official from a commercial bank said, "There is uncertainty in the loan market," and explained, "The psychology that 'it will become difficult again after the beginning of the year' could sharply increase the total loan volume."

The government previously announced in the '2021 Economic Policy Direction Core Tasks by Ministry' its plan to introduce an 'Advanced Household Debt Management Plan' focusing on strengthening the Debt Service Ratio (DSR) regulation within the first quarter of this year. The DSR is an indicator showing the borrower's repayment burden relative to their repayment ability, calculated by dividing the annual principal and interest repayment amount of all loans held by the borrower by their annual income.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, mentioned this policy at the real estate market inspection meeting with related ministers on the 22nd of last month, emphasizing, "We will check to ensure that measures such as household loan management including credit loans, application of borrower-level DSR to high-value and high-income credit loans, and strengthening post-management of large credit loans are implemented."

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