'Financial Sector Profit-Sharing System' Legislative Notice... Financial Companies Must Contribute 200 Billion KRW Annually for 5 Years

Mandatory Contributions Added for Banks, Insurance Companies, and Credit Finance Companies

[Asia Economy Reporter Kim Jin-ho] All financial institutions handling household loans, including banks, insurance companies, and card companies, must contribute approximately 200 billion KRW annually to low-income financial services over the next five years. This effectively implements a kind of 'financial sector profit-sharing system.'

The Financial Services Commission announced on the 8th that it will conduct a legislative notice for the amendment of the "Act on Support for Financial Life of Low-Income People" and the "Regulations on Support for Financial Life of Low-Income People," which include these details.

Accordingly, the scope of financial institutions subject to contributions, which serve as the credit guarantee fund for the Korea Inclusive Finance Agency, will be expanded from the current mutual finance cooperatives and savings banks to all financial companies, including banks, insurance companies, and specialized credit finance companies.

The contribution rate was set at 0.03%. Accordingly, the banking sector will bear about 105 billion KRW, while the specialized credit finance sector (about 18.9 billion KRW) and the insurance sector (about 16.8 billion KRW) will also share the burden. The total amount across all financial institutions is approximately 200 billion KRW. The contribution applies to all household loan products except those loans subject to contributions under other laws, guarantee-backed loans by the Korea Inclusive Finance Agency, and policy support products.

Regarding contributions related to guarantee usage, a differential rate (0.5% to 1.5%) will be applied to each financial institution based on the subrogation payment rate (subrogation payment amount relative to the financial institution's contribution). The contribution target is the credit guarantee amount of the financial institution that is the creditor of the individual receiving credit guarantees from the Korea Inclusive Finance Agency's low-income financial supplementary account.

The duties of the Integrated Low-Income Financial Support Center and the composition and operation methods of the Integrated Low-Income Financial Support Center Operating Council have also been specified.

Regarding the duties of the Integrated Low-Income Financial Support Center, it will be responsible for credit guarantees and fund loans to low-income individuals, as well as welfare linkage for low-income vulnerable groups. For the Operating Council, it was amended so that the vice president of the Korea Inclusive Finance Agency and the secretary-general of the Credit Recovery Committee will alternate as chairpersons of the Integrated Low-Income Financial Support Center Operating Council.

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