First Half Banking Sector Relational Finance Performance 11.2 Trillion Won

Encouraging Activation of Incentives and More Starting in the Second Half of the Year

[Asia Economy Reporter Kim Jin-ho] The balance of relational finance in the banking sector recorded 11.2 trillion KRW in the first half of this year. Thanks to the banks' active handling efforts, it increased by 8.5% (900 billion KRW) compared to the end of last year (10.3 trillion KRW).

According to the Financial Supervisory Service on the 12th, as of the end of June this year, the balance of relational finance amounted to a total of 11.2 trillion KRW, comprising 9.2 trillion KRW in loans to small and medium-sized corporations and 2 trillion KRW in loans to individual business owners.

By industry, manufacturing accounted for the largest share at 31.9%. Wholesale and retail trade (30.7%), services (10.6%), and food and accommodation (6.7%) followed. The average loan interest rate (based on balance) was 2.66%, down 0.05 percentage points from 2.71% at the end of last year.

The Financial Supervisory Service evaluated that it is continuously supplying stable funds for more than three years to small and medium-sized corporations and individual business owners facing management difficulties due to COVID-19, supporting crisis recovery. In particular, it analyzed that it contributed to resolving financing difficulties for small businesses and self-employed individuals with insufficient collateral ability or low credit ratings.

However, although the balance of relational finance continues to increase, the proportion of domestic banks' total small and medium-sized enterprise loans remains low at 1.27%. A Financial Supervisory Service official pointed out, "There is a need to activate the system to support overcoming the COVID-19 crisis."

Accordingly, the Financial Supervisory Service plans to promote activation from the second half of the year by expanding the scope of eligible targets and providing incentives for handling performance.

First, the eligibility criteria for individual business owners for relational finance will be relaxed from the current "3 years or more" to "1 year or more." In addition, banks will be instructed to revise their standards so that small and medium-sized enterprises meeting the relational finance requirements, such as industry (excluding real estate) and business duration (1 year or more), can also be included as support targets.

Furthermore, when awarding excellent banks supporting small and medium-sized enterprises (at year-end), the evaluation scoring for relational finance support performance and preferential systems will also be adjusted upward.

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