Lee Bok-hyun "On-site Inspection of Bank Household Loan Conditions Within This Month"

Lee Bok-hyun, Governor of the Financial Supervisory Service

Lee Bok-hyun, Governor of the Financial Supervisory Service, announced on the 16th that he plans to conduct on-site inspections of banks related to household loan management within this month.

After signing a business agreement with the National Investigation Headquarters to strengthen response and cooperation against illegal activities in the capital market, Governor Lee told reporters, "We believe household debt is within the manageable range," but added, "Since the regulation of the Debt Service Ratio (DSR) has become more important than before, we plan to conduct a fact-finding inspection to see whether banks' mortgage loan calculation processes are appropriate."

Regarding 50-year mortgage loans, he explained, "Loans are being issued based on variable interest rates, and there is an income flow according to life cycles, but there is no guarantee that interest rate fluctuations will not occur within 50 years," adding, "When simulations were run under interest rate fluctuation scenarios, there were points where income limits were exceeded, but these may not have been considered when the model was created. We will check these and other unforeseen aspects."

Governor Lee added, "The inspection will focus more on operational appropriateness and policy direction rather than on examinations or sanctions." The on-site inspection is also expected to include an investigation of unsecured loans. He said, "Through the on-site inspection, we will see which areas the loans were used for," adding, "(Loans) could have gone to real estate, capital markets, or living expenses, and we will check how they are actually distributed."

Regarding the expansion of mortgage loans by internet-only banks, he said, "I think there are some positive aspects in triggering price competition," but also explained, "Considering the nature of internet-only banks, which have a policy goal of supplying funds to middle- and low-credit borrowers, I have a critical view on whether the current concentration of mortgage loans aligns with the system, and these will also be subject to inspection."

On the proportion of variable interest rates, he stated, "The core reason why risk is transferred to borrowers due to volatility during recent interest rate fluctuation periods lies in the variable interest rate structure," adding, "Fixed rates are not inherently good and variable rates bad, but I believe it is a dereliction of duty for authorities to leave the situation where the burden falls on borrowers as is."

Regarding criticism that the Special Bogeumjari Loan increased household loans, he explained, "Since the limit has already been exhausted, I can confidently say it will not be a major factor in the second half of the year."

On the Financial Monetary Policy Committee's view that pressure to lower loan interest rates weakens the effect of monetary policy, Governor Lee said, "The monetary authorities may think so," but added, "With the variable interest rate proportion exceeding 80%, borrowers are bearing the risk, so I believe micro-level intervention is necessary."

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