[2021 National Audit] Go Seung-beom, Financial Services Commission Chairman, "Will Not Apply DSR Regulation to Jeonse Loans" (Comprehensive)

National Assembly Political Affairs Committee Financial Services Commission Audit

Financial Services Commission Chairman Ko Seung-beom attended the National Assembly's inspection of the Financial Services Commission held by the National Assembly's Political Affairs Committee on the 21st and responded to lawmakers' questions. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Jin-ho Kim] Ko Seung-beom, Chairman of the Financial Services Commission, stated on the 21st, "The additional household debt measures to be announced next week will not apply the total debt service ratio (DSR) regulation to jeonse loans."

Chairman Ko appeared at the National Assembly's Political Affairs Committee audit on the same day and said, "After thorough consideration of measures for actual demand borrowers, we concluded that protection for them is necessary."

However, Chairman Ko added, "Our stance on the need for strong household debt management remains unchanged," and "We will carefully monitor and manage concerns that jeonse loans may trigger gap investments."

Currently, jeonse loans are in a regulatory blind spot regarding the DSR. Given the recent surge in jeonse loans has been identified as another potential risk in household debt, the application of DSR regulations to jeonse loans was strongly considered. However, Chairman Ko made it clear that it will not be included in this round of measures.

If jeonse loans were included in the borrower-level DSR calculation, including principal repayment, it would effectively block not only the relevant jeonse loans but also additional loans, raising concerns about harm to actual demand borrowers.

Meanwhile, the core of the additional household debt measures expected to be announced on the 26th is the 'repayment ability assessment.' Total household debt management and strengthening of DSR regulations are anticipated.

First, an early introduction of the DSR is expected. Initially, the Financial Services Commission planned to implement the borrower-level DSR 40% regulation in three phases. The DSR 40% limits the repayment of loan principal and interest to within 40% of annual income.

Currently, the DSR regulation is preemptively applied to mortgage loans for homes priced over 600 million KRW in regulated areas and to credit loans exceeding 100 million KRW. The plan is to expand the scope to total loans exceeding 200 million KRW in July next year (phase 2) and 100 million KRW in July 2023 (phase 3), but there is consideration to advance this schedule. Additionally, to prevent a balloon effect in the secondary financial sector, it is expected that the DSR 40% will be uniformly applied to both primary and secondary financial institutions.

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