Dokyu-sang "Expansion of Non-bank Household Loans... Early Measures to Resolve Regulatory Arbitrage" (Update)

"Introduction and Implementation of 'Household Sector Economic Response Buffer Capital' in Q4"
"Linked to Household Loan Growth Rate Forecast Fee... Plans for Up to 10% Discount and Surcharge"

Dokyu-sang, Vice Chairman of the Financial Services Commission

[Asia Economy Reporter Kwangho Lee] Do Kyusang, Vice Chairman of the Financial Services Commission, announced on the 15th, "We will newly introduce and implement the 'Household Sector Economic Response Buffer Capital' in the fourth quarter, and from next year, we plan to link the household loan growth rate and risk level to the forecast fee, applying discounts or surcharges of up to 10%."

Vice Chairman Do held the 1st Household Debt Risk Management Task Force (TF) meeting via video conference at the Government Seoul Office on the same day, stating, "If the excessive increase in household debt continues, it will cause serious side effects such as intensified asset market bubbles and increased household burdens."

He explained, "Household loans increased by 63.3 trillion won in the first half of this year, averaging 10.6 trillion won per month. Although this is a larger increase compared to the first half of last year (6.1 trillion won per month), the growth rate has somewhat eased compared to the second half of last year (12.6 trillion won per month), when household debt began to rise significantly."

He continued, "Overall, the increase in the banking sector remained at the level of the first half of last year, but in the non-banking sector, the increase actually expanded. Considering the higher housing transaction volume compared to previous years, the banking sector's management efforts can be positively evaluated, but risks are rising mainly in the non-banking sector."

Vice Chairman Do emphasized, "The financial authorities will establish a more detailed management system to ensure that the household debt growth rate is properly controlled within the 5-6% range this year. First, we will closely monitor the household debt management measures implemented from the 1st of this month, including the phased expansion of the Debt Service Ratio (DSR) at the borrower level, to ensure they take root in the market."

He also mentioned, "We will conduct rigorous inspections on financial institutions that neglect household loan risk management. We will introduce and implement the household sector economic response buffer capital in the fourth quarter, and from next year, link the household loan growth rate to the forecast fee, applying discounts or surcharges of up to 10%."

Furthermore, he added, "Regarding the borrower-level DSR regulation currently operated differentially, if the increase in household loans in the non-banking sector continues by exploiting regulatory arbitrage, we will consider measures to promptly eliminate regulatory arbitrage between the banking and non-banking sectors."

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