"Less Than a Month Left"... Expansion of Mid-Interest Loans, Internet Banks Fighting for Survival

Achieving This Year's Goals Practically Difficult
Worried About the Impact of Production Quotas

[Asia Economy Reporter Kiho Sung] With less than a month left in 2021, internet-only banks are facing a dilemma. The proportion of loans to middle- and low-credit borrowers, promised to financial authorities, has not significantly increased in the third quarter, making it virtually impossible to achieve this year's targets. Previously, financial authorities warned that penalties would be imposed if the targets were not met, and with the decision on next year's household loan total volume regulation limit imminent, internet banks are becoming increasingly anxious. Industry voices are calling for measures such as excluding middle- and low-credit loans from the total volume regulation to boost these loans.

According to the Bankers Association on the 4th, as of the end of the third quarter this year, the proportion of loans to middle- and low-credit borrowers with a credit score (CB) of 820 or below among total unsecured loans was 13.4% for KakaoBank and 13.7% for K Bank. The year-end targets for the proportion of loans to middle- and low-credit borrowers set by KakaoBank and K Bank are 20.8% and 21.5%, respectively. Notably, K Bank's proportion decreased from 18.2% at the end of March to 15.5% at the end of June, and further down to 13.7% at the end of September. Toss Bank, which launched in October, was halted from lending just ten days after its launch due to financial authorities' household loan total volume management regulations. Toss Bank's mid-interest rate loan proportion stands at 28.2%, far exceeding other banks. However, with a target of 34.9% and lending operations suspended, increasing this proportion further is practically impossible. During business days, Toss Bank's proportion of middle- and low-credit borrowers even reached as high as 33.3%.

As none of the internet banks have met their targets, there are criticisms that the initial goals were set too high. Although the proportion of loans to middle- and low-credit borrowers had not been managed previously, it became a focal point when financial authorities announced measures in May this year and internet banks submitted their targets. This has led to opinions that the timeframe was too tight and that the plans became complicated due to the interplay with financial authorities' household loan total volume regulations.

The problem lies in next year. The Financial Services Commission recently proposed lowering next year's household loan total volume management target to 4-5%, down from this year's 5-6%, forcing financial companies to significantly reduce their limits for next year. Additionally, since financial authorities have stated that they will consider imposing disadvantages such as restrictions on new business approvals for internet banks that fail to meet the middle- and low-credit loan proportion targets, there are concerns that this could negatively impact next year's limits.

Internet banks are determined to achieve their mid-interest rate loan targets in the remaining month. This is because they expect that financial authorities will not impose penalties unconditionally but will consider how much effort the internet banks have made.

An internet bank official said, "The mid-interest rate loan target is a promise not only to the government but also to our customers, so we will do our best until the end. However, we need to consider feasible methods such as excluding middle- and low-credit loans and refinancing loans (loan switching) from the total volume regulation."

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