Unfair Loan Practices in Bank Financial Intermediation Support Totaling 230 Billion Won Over 5 Years

840 Billion in the First Half of the Year... 4.3 Times Compared to Last Year
Interest Rate Difference Between Banks Also Up to 3.07%P
Ando Geol: "Policy Finance Should Not Accrue to Bank Profits"

Ando-geol Member of Parliament

Over the past five years, improper (non-compliant) loans through the Financial Intermediation Support System have amounted to more than 230 billion KRW, and there have been significant interest rate differences between banks. The Financial Intermediation Support System is a program where the Bank of Korea lends funds at low interest rates ranging from 0.25% to 2% annually to improve financial accessibility for small and medium-sized enterprises (SMEs). When the Bank of Korea sets the support criteria, banks individually assess companies and decide on loans. Loans given to large corporations or closed businesses, or cases where early repayment reports are delayed, are classified as non-compliant loans.

According to the “Status of the Financial Intermediation Support System” data submitted by the Bank of Korea to Ahn Do-gul, a member of the Democratic Party of Korea representing Gwangju Dongnam-eul, the scale of non-compliant loans through the Financial Intermediation Support System surged 4.3 times from 19.54 billion KRW in the first half of last year to 84.03 billion KRW in the first half of this year. The increase was analyzed to be due to some banks providing support to industries not eligible for the program, such as real estate and finance.

Non-compliant loans executed over the past five years totaled 231.15 billion KRW. The breakdown of non-compliance was as follows: other reasons (regulation violations, bankrupt companies, etc.) accounted for the largest portion at 109.36 billion KRW, followed by delayed early repayment reports at 41.84 billion KRW, SME classification errors at 39.98 billion KRW, and closed businesses at 39.96 billion KRW.

While non-compliant loans varied by bank, they accounted for 0.1% to 0.3% of total loans across all banks. However, in some banks, the proportion of non-compliant loans compared to total loans was very high, reaching 33.7% in 2019 and 16.2% in 2022.

Additionally, an analysis of loan interest rates among banks within the program over the past five years revealed significant differences. In the case of the Trade Finance Support Program, the highest interest rate last year was 7.09%, while the lowest was 4.02%, showing a gap of 3.07 percentage points.

Representative Ahn stated, “While the system to support SMEs is necessary, some banks have a high ratio of improper loans and the amounts have surged,” and emphasized, “It is urgent to establish measures to reduce improper loans.”

He also added, “There are significant interest rate differences among banks during the Bank of Korea’s expansion of policy finance,” and stressed, “Thorough management and supervision are needed to ensure that the low-interest benefits of Financial Intermediation Support loans do not accrue as profits to banks.”

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