Regulation Eased on Banks' Loan-to-Deposit Ratio for Over 2 Trillion Won in Won Loans... Corporate Loans of 12 Trillion Won 'Breathe Easier'

On the 9th, officials were busy moving in the corridor of the Financial Services Commission at the Government Seoul Office in Jongno-gu, Seoul, where financial authorities decided to promote a plan to include mortgage loans (Judaemae) in the 'debt refinancing' infrastructure set to launch in May by the end of the year. Financial authorities explained that they aim to reduce the interest burden on mortgage loans by establishing a debt refinancing platform that allows users to compare financial sector loan interest rates at a glance and switch loans easily. Photo by Dongju Yoon doso7@

The financial authorities have decided to ease the soundness regulations applied to foreign bank branches in Korea, increasing their corporate loan capacity by 12 trillion won. On the 5th, the Financial Services Commission held the 7th Financial Regulation Innovation Meeting at the Bankers' Hall in Myeongdong, Seoul, to discuss measures to improve the won loan-to-deposit ratio regulation for foreign bank branches.

The loan-to-deposit ratio refers to the ratio of won loans to won deposits. It is a regulatory measure designed to curb excessive credit expansion by banks while encouraging deposit-based funding. The Financial Services Commission announced that it will relax the scale of banks subject to the won loan-to-deposit ratio regulation to those with won loans of 4 trillion won or more.

Currently, the won loan-to-deposit ratio regulation requires banks with won loans of 2 trillion won or more to maintain a loan-to-deposit ratio of 100% or less. Foreign bank branches are included in this scope, but with this regulatory easing, foreign bank branches in Korea such as the UK’s HSBC and Japan’s MUFG, whose won loans are between 2 trillion and 4 trillion won, will be excluded from the won loan-to-deposit ratio regulation.

The Financial Services Commission estimated that the easing of the loan-to-deposit ratio will increase the domestic corporate loan supply capacity of foreign bank branches by more than 12.2 trillion won.

Kim Joo-hyun, Chairman of the Financial Services Commission, stated, "Foreign bank branches primarily operate funds focused on corporate loans rather than household loans, so this rationalization of the won loan-to-deposit ratio regulation is expected to contribute to promoting competition in the banking sector from the perspective of corporate loans."

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