Ministry of the Interior and Safety Introduces Loan Limit Regulations for Saemaeul Geumgo Real Estate and Construction Sectors

To strengthen the soundness of Saemaeul Geumgo, loan limit regulations for specific industries such as real estate and construction will be introduced.

The Ministry of the Interior and Safety announced on the 4th that it has revised the "Saemaeul Geumgo Supervision Standards," an administrative notice from the ministry, and has been implementing it since December 29 of last year.

First, a regulation limiting credit concentration in specific industries such as real estate and construction was newly established, capping loans to each industry at 30% or less, and the total amount at 50% or less of total loans. The loan loss provision ratio for real estate and construction (an account set aside to cover estimated uncollectible amounts of receivables) will also be expanded from the current 100% to at least 130%, to be gradually increased by 2025.

The Ministry of the Interior and Safety explained, "The expansion of loan loss provisions for real estate and construction is a proactive revision compared to other mutual financial institutions," adding, "It aims to prevent loan concentration in the real estate and construction sectors in advance and to enhance loss absorption capacity in preparation for a slowdown in the real estate market."

In addition, overall soundness regulations have been strengthened to levels equal to or similar to those of other mutual financial institutions.

First, new regulations were introduced requiring loan loss provisions on unused amounts of credit lines and maintaining liquidity ratios at 80-100% or higher depending on the asset size of the Geumgo. The loan-to-deposit ratio (the ratio of loan balances to deposit balances in banks) has been tightened from the current 100% or less to 80-100% or less, depending on the installment repayment ratio of household mortgage loans.

Choi Byung-kwan, Director of the Local Finance and Economy Office at the Ministry of the Interior and Safety, stated, "We will comprehensively strengthen the soundness management of Saemaeul Geumgo so that it can regain the trust of the public and faithfully fulfill its original role in serving the common people and regional finance."

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