Financial Authorities: "One Month After Maximum Interest Rate Reduction... No Unusual Trends Like 'Loan Cliff'"

"Financial Burden Reduction Effects Appear Smoothly"

[Asia Economy Reporter Kwangho Lee] On the 19th, financial authorities announced that no unusual trends such as the feared credit crunch for low-credit borrowers occurred during the first month following the reduction of the statutory maximum interest rate (from 24% per annum to 20% per annum).

The Financial Services Commission held the 3rd meeting of the 'Maximum Interest Rate Reduction Implementation Task Force' with the Financial Supervisory Service, the Korea Inclusive Finance Agency, the Credit Counseling and Recovery Service, and various financial associations to review trends in loans to low-credit borrowers affected by the maximum interest rate reduction in savings banks, specialized credit finance companies, and loan businesses.

First, it was assessed that no unusual trends such as the 'credit crunch for low-credit borrowers' feared over the past month had appeared. After examining the trend of new credit loans to low-credit borrowers in the three sectors, the supply volume of low-credit loans during the one month after the maximum interest rate reduction slightly increased compared to the monthly average supply volume over the past year (July 2020 to June 2021).

Lee Se-hoon, Secretary General of the Financial Services Commission who chaired the meeting, stated, "During the one month after the maximum interest rate reduction, the effect of easing financial burdens has been smoothly realized without any unusual trends such as a contraction in funding opportunities for low-credit borrowers." He added, "However, as the real economy and financial conditions are not favorable due to factors such as the spread of COVID-19, the need to manage household debt, and the possibility of interest rate hikes, continuous monitoring and efforts to stabilize the new system are necessary."

He continued, "It is necessary for financial authorities and sectors to carefully monitor and manage so that loans at the necessary level for the low-credit group can be smoothly supplied." He requested, "Regarding follow-up measures such as the introduction of the Excellent Loan Business Operator System for inclusive finance, it is important that the system actually functions in the market. Therefore, through a prompt designation process, each institution should perform its role to expand the supply capacity of low-credit loans via bank borrowing and online platform mediation."

Furthermore, he added, "Please strengthen guidance and promotion of the Financial Supervisory Service's 1332 reporting center and the Korea Inclusive Finance Agency's 1397 counseling center so that citizens facing difficulties due to illegal private loans or loan rejections can receive help without struggling alone."

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