Banks Focusing on Corporate Loans... Increasing Interest in Credit Evaluation Too

Political Sphere Faces Pressure Over 'Interest Margin Business', Burden of Expanding Household Loans
Seeking Solutions Through Corporate Loans... Increased Focus on Credit Evaluation for Risk Management

[Asia Economy Reporter Minwoo Lee] Banks, pressured by authorities and public opinion over 'interest profiteering,' are unable to aggressively pursue household loan businesses. As a result, they are seeking new opportunities through corporate loans while also focusing on advancing their credit evaluation systems.

According to the financial sector on the 12th, Shinhan Bank applied the 'non-financial objectification' model to all corporate credit evaluation items for the first time in the banking industry yesterday. They created a 'Non-Financial Objectification Guide Provision System' to evaluate non-financial factors such as business and management risks, which were previously assessed qualitatively, using the latest data. This system utilizes information not only from the National Pension Service and National Tax Service tax data but also from the Korea Financial Telecommunications & Clearings Institute, including accounts receivable and automatic transfers. This innovation significantly reduces the time and cost required for non-financial evaluations while enhancing the objectivity and accuracy of credit ratings. A Shinhan Bank official stated, "Based on the experience of expanding the implementation of this non-financial evaluation guide, we plan to discover various alternative information and continuously improve the credit evaluation model."

In April, Shinhan Bank also actively introduced the latest technologies such as artificial intelligence (AI) and machine learning to develop a sophisticated credit evaluation model. Shinhan Bank's AI platform, SACP, is designed to refine the credit evaluation model by actively learning from traditional data like financial and transaction information, as well as internal and external alternative information such as the National Pension Service, audits, and disclosures.

IBK Industrial Bank is also actively utilizing big data and other resources to diagnose corporate credit status. A representative example is the recently established corporate credit automatic screening system. This integrated system diagnoses corporate credit status using the latest credit information and calculates customized credit limits for each company by reflecting technological capabilities and future growth potential. This has standardized credit screening processes and reduced the time and cost involved in evaluations.

Outside the banking sector, attention is also being paid to the corporate credit evaluation market. Toss is working on establishing a credit rating agency, aiming to launch it in the second half of this year. Korea Credit Data is preparing 'Korea Evaluation Information (tentative name),' specializing in credit evaluation for individual business owners. It has already obtained the official credit evaluation business license from the Financial Services Commission.

Although banks have been on the verge of breaking their highest performance records this year, household loan businesses have contracted due to pressure from authorities against 'interest profiteering,' leading to increased focus on corporate loans and the essential credit evaluation sector. According to the financial sector, the outstanding household loans of the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 699.6521 trillion won as of last month. This marks a continuous decline for six months this year, decreasing by 9.4008 trillion won. In contrast, corporate loans increased by approximately 37.8673 trillion won during the same period, showing steady growth regardless of company size. The increase in loans to large corporations alone was 9.5151 trillion won, matching the decrease in household loans. A financial sector official explained, "If political pressure to reduce interest margins continues, banks will inevitably focus more on corporate loans, which attract less scrutiny. Given concerns about sluggish loans to small and medium-sized enterprises due to COVID-19, more sophisticated evaluation models will gradually become necessary."

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