Financial Services Commission: "No Domino Effect of Household Loan Suspension from NongHyup"

Expressing Continued Strong Concerns About Credit Expansion

[Asia Economy Reporter Kim Jin-ho] Financial authorities have stepped in to quell concerns about a potential 'domino effect of loan denials' following the suspension of household loan issuance by NongHyup Bank and others, stating that "the possibility is very low."

On the 23rd, the Financial Services Commission (FSC) released a statement explaining that "the recent suspension of mortgage loan issuance by NongHyup Bank was a measure taken to comply with plans after significantly exceeding its target."

According to the FSC, as of the end of July, NongHyup Bank and the NongHyup Central Association had greatly exceeded their "annual household loan issuance targets." NongHyup Bank reported to the FSC that, based on its internal review, it judged that without a temporary suspension of the rapidly increasing mortgage loans, it would be impossible to meet the annual target, leading to the suspension decision.

However, the FSC pointed out that the likelihood of such measures, like the suspension of mortgage loan issuance by NongHyup Bank and NongHyup Central Association, spreading throughout the financial sector is very low. It explained that most financial institutions, including major commercial banks, still have ample room within their own household loan issuance targets.

In the case of Woori Bank and SC First Bank, it was also noted that adjustments in the supply of certain products were made according to their own annual risk management standards, cautioning against overinterpretation.

An FSC official stated, "We will closely monitor whether the suspension of loan issuance by some banks, including NongHyup Bank, causes any inconvenience to financial consumers."

Meanwhile, separate from this situation, the FSC expressed continued strong concerns about the rapidly expanding credit growth. Unlike the credit expansion period over the past year and a half, it warned that going forward, there could be increases in loan interest rates, reductions in preferential interest rates, and tightening of loan limits.

The FSC said, "Future adjustments in private credit supply will be inevitable," and added, "Economic agents need to comprehensively consider these aspects when making decisions about financing and other matters."

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