Ruling Party: "We Need to Create an App for 'Loan Switching' Between Banks"... Commercial Banks on Alert

People Power Party "Promptly Promote Large Debt Refinancing Platform Business" Urges Financial Services Commission
Authorities Preparing Deposit Interest Rate Comparison Platform

On the 7th, a scene at a bank counter in downtown Seoul shows the ongoing trend among major commercial banks to lower loan interest rates while raising interest rates on regular savings and installment savings products. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Sim Nayoung] The ruling party, the People Power Party, has requested financial authorities to promote a platform business for switching loans between banks, putting commercial banks in a position where they must engage in full-scale interest rate competition.

Seong Il-jong, chairman of the Policy Committee, stated at the party's floor strategy meeting on the 5th, "Financial authorities should promptly promote the refinancing loan platform business that enables one-stop refinancing loans (switching loans) at a new lending institution without visiting the existing lending institution for the convenience of the public," adding, "The financial conditions of the people are still difficult."

He continued, "Currently, high-interest products are being refinanced to low-interest ones, but the administrative hassle is significant. Please take follow-up measures to resolve this."

Chairman Seong emphasized, "This project was promoted last year but was suspended due to the financial sector's situation. However, in the current period of rising interest rates, which is worse than before, we must prioritize helping financial consumers above all," and added, "Please quickly gather opinions from the financial sector and swiftly proceed with system construction to build a non-face-to-face platform that allows consumers to more easily switch from high-interest products to low-interest products."

The refinancing loan platform is a one-stop platform that allows borrowers to compare loan product interest rates from commercial banks and internet-only banks in one place and switch loans non-face-to-face. Currently, when applying for refinancing, borrowers must visit bank branches with documents.

The People Power Party also announced that once the National Assembly is normalized and the Financial Services Commission chairman is appointed, they plan to hold a party-government meeting to support low-income finance, including the "refinancing loan infrastructure construction."

On the 7th, a scene at a bank counter in Seoul as major commercial banks continue to lower loan interest rates and raise interest rates on regular savings and installment savings products. Photo by Jinhyung Kang aymsdream@

Meanwhile, on the 6th, the Financial Services Commission announced the disclosure of the interest rate spread between deposits and loans for all domestic banks and stated that to promote interest rate competition among banks, it will pilot an online deposit product brokerage service through an online platform that allows comparison of deposit products from multiple financial companies by designating it as an innovative financial service.

Currently, loan product comparison platforms are active, but deposit product comparison platforms are virtually nonexistent due to insufficient related regulations. The Financial Services Commission stated, "Nine platform companies have expressed interest in the online deposit product brokerage business."

Additionally, to increase the acceptance rate of interest rate reduction requests, from August, the operating performance of the interest rate reduction request rights by bank (number of applications and acceptances, interest reduction amount) will be disclosed semiannually. Since 2019, explanations of the interest rate reduction request rights have been mandatory, but there was no way to check each bank's operating performance, which led to a lack of incentives for banks to increase acceptance rates.

The plan also includes provisions to ensure that banks properly guide consumers about their newly established rights to request explanations and raise objections regarding personal credit evaluation results. This applies to all individuals intending to enter into loan contracts, and consumers can request correction, deletion, or re-evaluation after checking their evaluation information.

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