San-eun Offers Ultra-Low Interest Loans Only to Employees... Labor-Management Agreement Still Pending Ahead of Revision

Providing Housing Loans to Employees at Interest Rates Lower Than Didimdol Loans

[Asia Economy Reporter Park Sun-mi] KDB Industrial Bank is in the process of raising the interest rates on housing loans for employees to the level of commercial banks, but the implementation has been delayed due to a lack of agreement between labor and management. The bank has been criticized for providing preferential treatment by offering housing purchase loans to employees at interest rates lower than those of commercial banks, making revision urgent.

According to the financial industry on the 1st, KDB Industrial Bank's labor and management are currently discussing changes to the housing loan system for employees but have yet to reach a consensus. Following the Ministry of Strategy and Finance’s announcement of the “Guidelines for Innovation in Public Institutions” amendment on the 2nd of last month, starting from the 3rd of this month, when supporting housing funds (for purchase or lease) or living stabilization funds, the loan interest rate must have the Bank of Korea’s published “bank household loan rate” as the minimum, and housing purchase loans should only apply to non-homeowners purchasing homes of 85㎡ or less.

However, the bank’s labor union opposes the changes, viewing them as a regression in employee welfare. Since changes to the housing loan system for employees require labor-management agreement under the Labor Standards Act, the bank cannot enforce the changes without union consent.

A KDB Industrial Bank official stated, "Although the Ministry of Strategy and Finance announced the amendment to the 'Guidelines for Innovation in Public Institutions,' it is a unilateral directive, so union members do not want the system changes," adding, "The biggest disagreement is over the loan interest rates, and the union has not yet formally responded to the bank’s proposal."

The bank lends up to 50 million KRW from its own budget to non-homeowner employees for housing purchase funds under internal regulations such as the Household Stabilization Fund Loan Operation Guidelines and Welfare Regulations Enforcement Rules. The housing purchase loan must be repaid within 20 years, including a grace period of up to 5 years. The issue lies in the loan interest rate.

According to the National Assembly Budget Office, as of the end of last year, KDB Industrial Bank’s housing purchase loan interest rate was 1.68%, which is 1.11 percentage points lower than the general commercial bank household loan rate of 2.79%. From 2016 to 2019, the bank had been lending housing purchase funds at interest rates 0.67 to 0.90 percentage points lower than commercial banks, but the gap has widened to 1.11 percentage points.

It is even set lower than the 2.05% interest rate of the Didimdol Loan, a policy mortgage for low-income households provided by the Korea Housing Finance Corporation. Because of the low-interest loans, the outstanding balance of KDB Industrial Bank’s housing purchase loans surged to 7.473 billion KRW at the end of 2020, more than five times the 1.428 billion KRW in 2016. The number of users also tripled to 181.

The National Assembly Budget Office judged that applying significantly lower loan interest rates than commercial banks amid the rapid increase in employee housing loans at KDB Industrial Bank is problematic and pointed out that "KDB Industrial Bank needs to refrain from lending to employees at interest rates lower than commercial housing loan rates by revising internal regulations."

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