450 Billion Won in 4 Days... Credit Loans Surge Immediately After Restrictions Lifted (Comprehensive)

'Panic Loans' Immediately After Resuming Due to Financial Authorities' Regulations
KOSPI '3000 Era' Opens... 'Debt Investment' Frenzy Plays a Role

[Asia Economy Reporter Kangwook Cho] As soon as commercial banks loosened restrictions on unsecured loans at the beginning of the new year, loan demand has been increasing daily, with loan amounts exceeding 450 billion KRW in just four days. This appears to be due to the so-called 'panic loans' triggered by fears that lending could be blocked again following last year's financial authorities' loan regulations. The surge in 'debt investment'?borrowing to invest?also played a role as the KOSPI surpassed the 3,000 mark for the first time ever, ushering in the 'Samcheonpi era' from the start of the year.

279.8 billion KRW in just 4 days... 453.3 billion KRW over 4 business days

According to the financial sector on the 8th, the outstanding balance of unsecured loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?increased by 453.3 billion KRW over four business days from January 4 to 7. On the first day of resuming unsecured loans, which had been temporarily suspended at the end of last year, January 4, there was a sharp increase of 279.8 billion KRW, followed by 64.7 billion KRW on the 5th, and 60.4 billion KRW and 48.4 billion KRW on the 6th and 7th, respectively.

This growth trend is considered unusual compared to previous years. Typically, in January, unsecured loan demand decreases and savings and deposit balances increase because year-end bonuses are paid during this period.

An official from a commercial bank said, "The psychology of borrowers who experienced a 'loan cliff'?thinking 'let's just get it for now'?and the boom in debt investment fueled by a thriving stock market seem to have contributed."

Commercial banks resume unsecured loans... Restoring previously lowered limits

NH Nonghyup Bank restored the maximum limits of its major unsecured loan products, which had been lowered at the end of last year, back to previous levels starting this day. The limit for the 'Exciting Office Worker Loan,' an unsecured loan product for salaried workers, was raised from 100 million KRW to 250 million KRW. The limit for the 'NH Strong Office Worker Loan' increased from 100 million KRW to 200 million KRW.

The limit for the 'Super Pro Loan,' targeted at professionals, was also restored from 100 million KRW to between 200 million and 250 million KRW depending on the occupation. The limit for the 'NH Financial Leader Loan,' aimed at financial professionals, was raised from 200 million KRW to 250 million KRW.

NH Nonghyup Bank also restored the preferential interest rates for its non-face-to-face unsecured loans for office workers, 'All One Office Worker Loan' and 'All One Minus Loan,' which had been completely removed at the end of last year, back to previous levels.

Earlier, Woori Bank resumed sales of its non-face-to-face unsecured loan product 'Woori WON Office Worker Loan,' which had been suspended since December 11 last year, starting January 7. The maximum loan limit per case (100 million KRW) and preferential interest rate (up to 0.4 percentage points) remained the same as before the suspension. However, the maximum loan limit for the overdraft account (account-type revolving loan) was lowered from 100 million KRW to 50 million KRW.

Shinhan Bank and KB Kookmin Bank resumed unsecured loans from January 4. Hana Bank also restarted sales of its main non-face-to-face unsecured loan product, 'Hana One Q Unsecured Loan,' from January 5. KakaoBank resumed its 'Minus Account Unsecured Loan' for office workers, which had been suspended since December 17 last year, on January 1.

Following the financial authorities' loan regulations at the end of last year, commercial banks effectively locked down unsecured loans. In fact, the outstanding balance of unsecured loans at the five major banks decreased by 44.3 billion KRW at the end of December compared to the previous month. However, with the resumption of unsecured loans in the new year, suppressed demand surged all at once, accelerating the growth rate of unsecured loans, according to banking sector analysis.

Monthly unsecured loan increase limit over 20% used up... Financial authorities closely monitoring

The financial authorities are closely monitoring the situation. Within three days of resuming unsecured loans, more than 20% of the monthly unsecured loan increase limit (2 trillion KRW) managed by the financial authorities was used up. However, since some banks have only eased the previously reduced unsecured loan limits, it is understood that they plan to observe the situation for the time being.

At the end of last year, there was an outcry from office workers and small business owners who were pushed to the 'loan cliff' due to government and bank loan regulations aimed at curbing household debt growth by reducing loan demand. Following the financial authorities' request to manage total household loans, deposits and savings at the five major commercial banks shrank by about 7.5 trillion KRW in one month. In addition to analyses that 'money moves' are occurring from deposits and savings to stock market and real estate waiting funds due to continued ultra-low interest rates, there are also criticisms that social distancing at level 2.5 and year-end difficulties in the self-employed sector have increased urgent cash demand among ordinary people.

Although the previously blocked unsecured loan channels have reopened, loan conditions for ordinary people are likely to remain unfavorable this year. Yoon Seok-heon, Governor of the Financial Supervisory Service, said at a press conference at the end of last year, "Total loan volume regulation (on banks) is necessary for the time being." Furthermore, a regulatory plan that sets the total loan amount based on income is expected to be introduced in the first quarter of this year, raising concerns that more ordinary people will be driven to high-interest private loans.

Senior Research Fellow Sungwook Park of the Korea Institute of Finance pointed out, "With the prolonged economic shock of COVID-19, economic polarization is expected to deepen for the time being, increasing the risk of loan defaults among vulnerable groups."

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