Legislative Notice for Enforcement Decree Amendment of the Loan Business Act to Promote Financial Companies' Overseas Investment

From now on, financial companies will be exempt from the application of the Loan Business Act for foreign currency-denominated bonds acquired through loans executed for non-resident foreigners. This is intended to ease regulations on offshore lending activities and to promote the overseas expansion of financial companies and support for export companies by policy financial institutions.

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 the financial authorities decided to include mortgage loans (Judaemae) in the 'debt refinancing' infrastructure scheduled to be launched in May by the end of the year. The 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 loan interest rates across the financial sector at a glance and switch loans easily. Photo by Yoon Dong-joo doso7@

The Financial Services Commission announced on the 18th that it will conduct a legislative notice for the amendment of the 'Enforcement Decree of the Loan Business Act' and the 'Supervisory Regulations on Loan Business, etc.' containing these details. The amendment plan will collect additional opinions through the legislative notice until the end of October, and then be implemented after approval by the Financial Services Commission and the State Council.

Current loan business laws limit the entities to which financial companies can transfer loan claims to loan business operators, credit finance institutions, public institutions, etc., to prevent indiscriminate distribution and collection of loan claims. However, overseas financial institutions are not included as eligible transferees.

As a result, even if institutions like the Korea Development Bank participate in overseas infrastructure investments and acquire loan claims, they could not sell these claims to overseas financial institutions and had to hold the entire claims. Additionally, in the case of foreign bank branches in Korea (foreign bank branches), it is customary in trade finance to transfer acquired loan claims to the bank’s overseas head or branches or affiliates, but this could be seen as prohibited under the current wording of the Loan Business Act.

Accordingly, the government plans to reform the loan claim transfer regulations under the Loan Business Act to exclude the application of the Act to foreign currency-denominated claims acquired by financial companies through loans provided to non-resident foreigners (individuals or corporations). At the same time, it will establish a legal basis for business activities allowing foreign bank branches to transfer claims to their overseas head or branches only in cases of foreign currency claims in trade finance or other cases designated and announced by the Financial Services Commission.

With this amendment, regulations on offshore lending activities will be eased, enabling financial companies and policy financial institutions to actively provide infrastructure financial support abroad.

Furthermore, for foreign bank branches, existing business practices will be incorporated into the law, and by enabling overseas transfers of foreign currency-denominated corporate loan claims, additional liquidity can be secured, which is expected to expand financial support for domestic export and import companies, according to the authorities.

Kim Jin-hong, Director of the Financial Consumer Bureau, stated, "In the case of personal claims, the prohibition on overseas transfers will be maintained, and regulations will be eased only for loans mainly provided to large corporations, considering the purpose of the Loan Business Act to protect individual and small business borrowers." He added, "Regulations will be relaxed only for foreign currency-denominated claims, and supervisory measures such as monitoring by the Financial Supervisory Service will be implemented in parallel to prevent side effects and ensure thorough management."

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