Mutual Finance Tightens Real Estate Loans... Total Loans Limited to 30%

Financial Services Commission Announces Legislative Notice for 'Mutual Finance Business Supervision Regulation Amendment'

[Asia Economy Reporter Kwangho Lee] To prevent the concentration of real estate loans in mutual finance businesses, regulations will be introduced to limit the loan proportions for the real estate and construction industries to within 30% of total loans, respectively.

The Financial Services Commission announced on the 29th that it will publicly notify the "Amendment to the Mutual Finance Business Supervision Regulations," which includes these measures, until September 7th.

Currently, the mutual finance sector does not separately regulate credit limits by industry, resulting in a high proportion of loans allocated to the real estate and construction industries within total credit.

To address this issue, the Financial Services Commission has set a cap so that loans to individual business owners and corporations in the real estate and construction industries do not exceed 30% of total loans, respectively.

Liquidity ratio regulations for mutual finance institutions will also be introduced. Institutions must maintain a liquidity ratio of 100% or higher, calculated as liquidity assets (cash, deposits, etc.) relative to liquidity liabilities (savings deposits, borrowings) with a remaining maturity of within three months.

However, for cooperatives with total assets under 100 billion KRW, the liquidity ratio requirement will be relaxed to maintain at least 90%, considering regulatory acceptance and other factors.

A Financial Services Commission official stated, "The amendment is scheduled to be revised within this year after public notification, consultation with related ministries, review by the Regulatory Reform Committee, and approval by the Financial Services Commission."

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