Financial Public Enterprises Exempt from LTV Regulations... "High Risk of Preferential Loans"

Common People's Money Flow Blocked, Financial Public Enterprises Smoothly Grant Internal Loans
Regulation-Free Safe Zone... Intensifying Controversy Over 'Special Welfare' Benefits

[Asia Economy Reporter Kim Hyo-jin] As the scale of in-house loans at financial public enterprises has significantly increased, voices are rising that this behavior is contradictory to the government's tightening of loans by commercial banks.

This can be interpreted as public sector companies enjoying privileges in their own 'private leagues,' similar to the speculative loan scandal involving employees of Korea Land and Housing Corporation (LH).

The fact that the loans were nominally for living stabilization funds and housing funds further fuels criticism. As loan regulations, justified by the financial difficulties of ordinary people due to COVID-19 and the stabilization of the housing market, have been maximized, the financial lifelines for real demanders have been blocked. Critics also point out that the government, which only imposes regulatory measures on banks while neglecting issues 'under the lamp,' cannot avoid criticism.

◆Financial Public Enterprises in a ‘Different World’ Amid Loan Regulation Tunnel = According to data obtained and analyzed by Asia Economy on the 29th, the increase in in-house loans at financial public enterprises such as the Korea Deposit Insurance Corporation, Korea Credit Guarantee Fund, Korea Housing Finance Corporation, KDB Industrial Bank, Korea Securities Depository, Korea Asset Management Corporation (KAMCO), and the Korea Inclusive Finance Agency has noticeably grown since 2019, when housing-related loan regulations and COVID-19 began to severely impact the financial market and the overall economy.

The total loans combining living stabilization funds and housing funds increased only by KRW 4.36622 billion from KRW 38.58482 billion in 2018 to KRW 43.95706 billion in 2019, but then jumped by KRW 5.76481 billion to KRW 51.7688 billion last year.

The government and financial authorities have been implementing a series of stringent housing-related regulations since early 2019, starting with the ban on high-priced mortgage loans covering both sales and jeonse (long-term lease) markets.

In 2020, from February when the impact of COVID-19 became full-scale, financial support was mobilized extensively, mostly targeting vulnerable groups such as self-employed individuals and ordinary citizens with weak financial capacity. Meanwhile, financial authorities have continued to pressure loan suppression, starting from September last year by requesting major commercial banks to submit credit loan growth management targets.

A financial sector official said, "Due to soaring housing prices, young people are rushing to 'Yeongkkeul' (borrowing to the limit) to buy their own homes, and ordinary people such as self-employed individuals are knocking on the doors of banks and guarantee institutions to borrow even a few million won for living expenses," adding, "In a situation where the financial difficulties of ordinary people have grown larger than ever, in-house loans at financial public enterprises can easily be seen as ‘privileged loans.’"

◆Financial Public Enterprises as a ‘Regulation-Free Zone’ Face Criticism for ‘Privileged Welfare’ = The controversy over ‘privileged in-house welfare’ at financial public enterprises is not new. In particular, there have been consistent criticisms that loan limit regulations applied to all citizens do not apply to in-house loans at financial public enterprises, revealing many loopholes. Avoiding the Loan-to-Value (LTV) ratio regulation under the name of in-house welfare is a representative example.

For instance, KAMCO supports guaranteed loans separate from LTV regulations for employees without housing who have worked for more than two years. The Korea Credit Guarantee Fund allows loans up to 70% of the LTV limit regardless of whether the property is in a real estate regulation zone.

There are also concerns that financial public enterprises are lowering in-house loan interest rates contrary to the trend in the banking sector.

When the Korea Credit Guarantee Fund’s loan interest rates were between 2.41% and 3.41%, only nine employees with dependents used living stabilization fund loans, borrowing a total of KRW 205 million. However, as interest rates dropped to 2.24%?3.24% in the first half of last year and the minimum rate fell to 1.87% in the second half, the number of borrowers surged more than 14 times to 129, with the loan amount soaring to KRW 2.88 billion.

Kang Min-guk, a member of the People Power Party, pointed out this fact during last year’s audit, stating, "Since employees can receive overlapping loans beyond bank loans, a ‘regulation-free zone’ is created, which is unfair."

Jung Sung-ho of the Democratic Party said, "If in-house loans at public institutions are perceived as privileges contrary to public sentiment and government policy, they should be improved to a socially acceptable level."

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