LH Speculation Fallout Spreads to Banking Sector: "Recall All Loans Suspected of Speculation"

Eun Sung-soo Urges Bank Presidents to Swiftly Recover Loans from Real Estate Speculators
Banks Likely to Begin Self-Inspection of Real Estate Loans... Household Debt Measures Including Non-Mortgage Loan Regulations to Be Announced This Month

[Image source=Yonhap News]

[Asia Economy Reporter Kwangho Lee] The aftermath of real estate speculation allegations involving some employees of Korea Land and Housing Corporation (LH) is showing signs of spreading to the banking sector.

As financial authorities emphasize the role of banks in eradicating real estate speculation, they have directly requested bank presidents to promptly recover loans related to speculators. Accordingly, banks are likely to conduct intensive inspections of real estate loan statuses in suspected speculative areas and launch large-scale investigations into whether there were any issues during the loan execution process.

Moreover, with regulations related to non-housing collateral loans expected to be included in the household debt management plan to be announced in mid-month, the ripple effects of the LH incident are anticipated to spread throughout the banking sector.

On the 1st, Eun Sung-soo, Chairman of the Financial Services Commission, emphasized at a meeting with commercial bank presidents held at the Seoul Bankers' Hall, "To prevent real estate speculation, it is important that sound loans are made and that the counters make self-purification efforts," adding, "There must never be any connection between speculative real estate projects and bank employees."

Chairman Eun urged the swift recovery of loans to speculators who are obligated to dispose of farmland. He said, "Please note that once the Real Estate Transaction Analysis Institute is established in the future, financial companies will be obligated to report land-secured loans deemed suspicious of speculation to the institute."

[Image source=Yonhap News]

Earlier, the Financial Services Commission also launched a special financial response team to eradicate real estate speculation. On the previous day, Do Gyu-sang, Vice Chairman of the Financial Services Commission, held the inaugural meeting of the 'Special Financial Response Team for Real Estate Speculation' at the Government Seoul Office and stated, "Under the determination that 'there is no tolerance for real estate speculation,' we are activating the special financial response team for real estate speculation starting today." Vice Chairman Do added, "We will deploy all available personnel and resources in the financial sector to respond to real estate speculation with the highest level of vigilance."

The financial response team, chaired by Vice Chairman Do, includes about 100 experts from the Financial Services Commission, Financial Supervisory Service, Korea Federation of Banks, and Credit Information Services. The team plans and oversees on-site inspections and status checks of real estate speculation in coordination with the Government Joint Special Investigation Headquarters.

Based on the ongoing investigation into non-housing collateral loans, financial authorities plan to announce a household debt management plan including regulations on non-housing collateral loans after mid-month. The upcoming measures are expected to strengthen the loan-to-value ratio (LTV) for non-housing collateral loans in relatively lenient mutual finance sectors. For example, the LTV for non-housing collateral loans in mutual finance sectors such as NongHyup is currently allowed up to 70%. This is based on administrative guidance rather than legal regulation.

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