"Funding Costs Rise by 0.26%p for Each One Multiple Tightening of Leverage Ratio Regulation"... Academia Calls Unanimously for Deregulation

"2026 Credit Card Association Spring Seminar" Held

Professor Jiyong Seo Quantitatively Demonstrates Correlation Between Leverage Regulation and Funding Costs

"Easing Regulations and Allowing Entry Into Non-Financial Sectors Is Needed to Revitalize Productive Finance"

A study has found that if the leverage ratio regulation for credit card companies is tightened by one multiple, their funding costs increase by approximately 0.26 percentage points. This is notable as it quantitatively demonstrates that stricter asset soundness regulations can have a negative impact on actual funding.

Academic experts unanimously stated that, in order to resolve management difficulties faced by credit card companies and promote productive participation in finance, the financial authorities should promptly ease the leverage ratio regulations and lift restrictions on entering platform and non-financial businesses.

Panels attending the 2026 Spring Seminar hosted by the Korea Credit Card Association on the 8th at the Bankers’ Hall in Jung-gu, Seoul, are taking a commemorative photo. From the left: Professor Eugene Ho Yoo of Sangmyung University, Attorney Ilhong Seok of Kim & Chang, Senior Researcher Myunghyun Jang of the Credit Finance Research Institute, Seo Jiyong, President of the Korea Credit Card Association, Professor Sangmi Chae of Ewha Womans University, Director Gunhee Lee of the Korea Credit Card Association, and Professor Chul Choi of Sookmyung Women’s University. Korea Credit Card Association

"Leverage Regulations Increase Funding Costs and Hinder Innovative Investment"

On May 8, the Korea Credit Card Association held its "2026 Spring Seminar" at the Bankers' Hall in Jung-gu, Seoul, discussing ways to ease financial regulations to enhance consumer welfare and revitalize productive finance.

Jiyong Seo, Professor at Sangmyung University, presented on the topic "Easing Leverage Ratio Regulations and Expected Effects," pointing out, "The stricter the leverage regulation, the higher the funding costs for credit card companies, which undermines their capacity for innovative investment." Professor Seo analyzed panel data from seven domestic credit card companies from the first quarter of 2016 to the third quarter of last year, and found that tightening the leverage ratio regulation by one multiple increases funding costs by about 0.26 percentage points.

The leverage ratio refers to the limit on total assets relative to equity capital, and a lower figure is seen as an indicator of sound asset quality. Professor Seo explained, "As companies approach the regulatory limit, credit rating agencies tend to downgrade their ratings, causing the risk premium to rise sharply." In contrast, relaxing the regulatory limit by just one to two multiples led to a 0.23 percentage point decrease in funding costs.

Currently, the regulatory limit set by the financial authorities is eight times, but for card companies with a dividend payout ratio exceeding 30%, a de facto seven times limit applies. The study found that Samsung Card had the lowest leverage at 4.9 times, while Hyundai Card was closest to the regulatory limit at 7.1 times. Professor Seo emphasized, "Easing the leverage regulation leads to a reduction in funding costs, which in turn directly enhances consumer welfare by lowering card loan interest rates."

An image depicting wealthy individuals making payments with virtual assets instead of cards at travel destinations.

The Need to Develop New Revenue Models... Easing the Separation of Banking and Commerce

Sangmi Chae, Professor at Ewha Womans University, in her presentation on "The Need to Ease Regulations on Credit Card Companies Entering Platform and Non-Financial Businesses," pointed out, "While big tech companies freely expand from platforms into finance, credit card companies face difficulties expanding their business simply because they are financial institutions."

According to Professor Chae, credit card companies hold over 12 billion transaction data records per month. When combined with MyData 2.0 or generative artificial intelligence (AI), this data can create new revenue models, such as alternative credit scoring for the financially underserved, providing business intelligence for small business owners, and offering hyper-personalized financial services. However, Professor Chae also mentioned five potential risks, including asset soundness deterioration and consumer protection, and stressed, "Regulatory easing should not mean the abolishment of regulations, but rather a shift from pre-entry regulations to a risk-based post-entry supervisory regime."

Sangbong Kim, Professor at Hansung University, in his presentation on "Business Investment Direction and Systemic Changes for Credit Card Companies," argued that corporate finance in Korea should shift from being loan-centered to investment-centered.

According to Professor Kim, the outstanding balance of loans to domestic small and medium-sized enterprises exceeds 1,000 trillion won, while venture investment is only around 13 trillion won. He noted, "Unlike major overseas card companies that have diversified portfolios through fintech mergers and acquisitions (M&A) or equity investments in startups, Korea is overly focused on IPO investments." He emphasized the need to ease the separation of banking and commerce and restrictions on ancillary business operations so that financial companies can directly invest in technology firms.

Myunghyun Jang, Senior Researcher at the Credit Finance Research Institute, expressed concern that changes to corporate card regulations and the structure of interest-free installments could reduce consumer benefits. He stated, "An increase in funding spreads and maturity pressures is very likely to result in a reduction of interest-free installment benefits," and recommended the development of a sophisticated regulatory framework that considers the allocation of cost burdens and changes in consumer benefits.

Calls for regulatory reform continued during the general discussion session. Geonhee Lee, Director of the Korea Credit Card Association, pointed out, "Government-backed programs such as the Saitdol Loan are complicated and offer little interest rate advantage, making them difficult for card companies to utilize. It is urgent to expand the card bond issuance limit to improve the practical funding conditions."

Cheol Choi, Professor at Sookmyung Women's University, emphasized, "Card companies are already serving as platforms connecting consumers and merchants. The current reality, where reporting is effectively operated like an approval system, should be improved so that card companies can freely design integrated financial and non-financial business models."

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