FSC to Randomly Inspect Business Loans Under 100 Million Won and Corporate Loans Under 500 Million Won

Household Debt Inspection Meeting Held
Monitoring the Status of Jeonse Loan Issuance
Growth of Household Loans in July Slows Compared to Previous Month

The financial authorities will now conduct inspections on corporate loans of up to 500 million won and individual business loans of up to 100 million won, which had previously been exempt from such checks.

On July 25, the Financial Services Commission announced at a joint “Household Debt Inspection Meeting” with related agencies that it would conduct random inspections to prevent the use of business loans for home purchase funds following the June 27 lending regulations.

During this meeting, it was decided that, in order to block circumvention of the June 27 lending regulations, a certain proportion of samples from corporate loans of 500 million won or less and individual business loans of 100 million won or less would be selected for inspection. In addition, since July 21, the guarantee ratio for jeonse loans in the Seoul metropolitan area and regulated areas has been strengthened to 80%, so the authorities will also closely monitor the status of jeonse loan issuance.

The Financial Services Commission explained that the growth rate of household loans in July has slowed compared to June, and the rate of increase in apartment sales prices in major areas of Seoul has also decreased. They assessed that these results reflect the effects of the June 27 lending regulations and the implementation of the third-stage stress Debt Service Ratio (DSR).

The Financial Services Commission stated, “It is true that the growth of household loans has somewhat slowed due to these measures, but this is largely attributable to a decline in other types of loans such as credit loans. Until the housing market overheats and the increasing trend in mortgage loans are further stabilized, we will closely monitor the implementation of these measures and, if necessary, immediately enforce additional prepared actions, such as further strengthening the LTV in regulated areas and implementing macroprudential regulations.”

Regarding the strengthening of the jeonse loan guarantee ratio, which has been in effect since July 21, they added, “All guarantee institutions, including Seoul Guarantee, which recently experienced a system failure, must thoroughly inspect their IT systems to ensure that the revised system is implemented without any issues. Financial institutions should also further strengthen their screening of jeonse loans, given the lower guarantee ratio.”

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