[Bank President 2022 Outlook] "Next Year's Loan Freeze... Increasing Loans for Medium and Low Credit Borrowers"

Survey of 12 Major Bank CEOs on Next Year's Financial Market
Management Threats: "Inflation & COVID-19"
Housing Price Increase Expected to Slow
75% Predict "Record High Performance Again Next Year"
Next Year's Survival Keyword: 'Platformization'

Main Branch Buildings of Major Commercial Banks

[Asia Economy Reporter Kwangho Lee] Domestic bank presidents have announced plans to expand mid-interest rate loan products targeting middle- and low-credit borrowers next year. This is in response to the expected surge in loan demand in the mid-interest rate market as regulations on the Debt Service Ratio (DSR) per borrower will be tightened from next month, and total loan volume management will become more stringent.

The factors identified as threats to management next year include inflation and the resurgence of COVID-19, which increase uncertainty. Bank presidents plan to focus on strengthening soundness to mitigate the impact of additional base rate hikes and the termination of the COVID-19 soft landing program support in March next year.

On the 14th, Asia Economy conducted a written survey on the ‘2022 Financial Market Outlook’ targeting 12 heads of domestic commercial, regional, internet-specialized, and foreign banks. The majority expressed intentions to focus on the mid-interest rate market in their lending strategies for next year.

Given the limitations on growth due to the government’s household debt management measures, banks intend to prioritize supplying mid-interest rate loans to middle- and low-credit borrowers, who are excluded from regulatory targets. Earlier, on the 10th, the Democratic Party and the government held a household debt policy meeting and decided to exclude mid-interest rate loans from the total volume management limit starting next year.

There was a unanimous voice that uncertainty in the financial environment next year will remain high. All bank presidents (100%) who responded to the survey cited inflation and the resurgence of COVID-19 as factors threatening bank management next year. Additionally, 8 respondents (66.6%) pointed to intensified market competition due to the expansion of financial services by big tech and fintech companies.

The record-high performance trend this year is expected to continue next year. Nine heads (75.0%) anticipated that interest income will increase compared to this year due to rising market interest rates and external growth.

Regarding next year’s housing price outlook, more than half expected a slowdown compared to this year. Seven bank presidents (58.3%) responded that the increase is likely to be limited due to strengthened total household debt management. Three (25.0%) predicted volatility depending on real estate policies after the presidential election. Two (16.6%) expressed the view that a decline in housing prices will be difficult until supply issues are resolved.

Among the 12 heads, seven (58.3%) identified ‘strengthening capabilities as a platform company’ as the key to survival next year. While financial services have focused on digitalization so far, the plan is now to evolve into a platform company connecting various suppliers and consumers. In particular, the MyData project, which will be fully implemented from next year, is expected to be an important factor accelerating this change.

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