Large Savings Banks with Over 1 Trillion Won, Credit Extension Limit Increased by 20%

Granting a 1-Year Disposal Period for Violations of Investment Limits Due to Asset Price Fluctuations
Establishment of Approval Review Criteria for Dissolution, Merger, and Capital Reduction

[Asia Economy Reporter Kwangho Lee] Financial authorities will increase the individual borrower credit limit by 20% for large savings banks with assets exceeding 1 trillion won, reflecting the increase in loan scale of savings banks. They will also establish approval review criteria for the dissolution, merger, and capital reduction of savings banks to enhance transparency, and grant a disposal period in case of investment limit violations due to asset price fluctuations.

The Financial Services Commission announced on the 11th that it will publicly notify the amendment to the Enforcement Decree of the Mutual Savings Banks Act containing these details.

First, the credit limit for individual borrowers will be increased by 20%. Considering that the personal credit limit was partially increased in 2016 (from 600 million won to 800 million won, a 33% increase), this improvement plan applies only to individual business owners and corporations.

In addition, legal grounds for approval review criteria for dissolution and merger will be established. The approval review criteria for dissolution and merger, which were stipulated in supervisory regulations, will be defined in the enforcement decree based on the legal delegation. Furthermore, approval review criteria for 'capital reduction,' which had no separate criteria and were operated considering cases from other financial sectors, will be newly established to enhance transparency of approval work and predictability for applicants.

Moreover, a disposal period will be granted in case of investment limit violations due to asset price fluctuations. Currently, when savings banks exceed investment limits due to price fluctuations of securities, no separate disposal period is granted, requiring immediate disposal. The financial authorities decided to grant a disposal period within one year to resolve cases where securities investment limits are exceeded due to price fluctuations.

The Financial Services Commission plans to complete the amendment before the enforcement date of the higher-level law after public notification, consultation with related ministries, and review by the Regulatory Reform Committee and the Office for Government Policy Coordination.

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