It was reported on the 22nd that the Financial Supervisory Service (FSS) has requested that secondary financial institutions, such as the Credit Finance Association and the Korea Savings Bank Federation, manage the limit of credit loans within the annual income of borrowers. The Financial Supervisory Service (FSS) previously recommended to commercial banks on the 13th that “the limit on credit loans of less than 100 million won, which is not subject to DSR regulations, should be lowered from twice the annual salary to one time.” As a result, it has become difficult for borrowers to use credit loans with annual income or more throughout the first and second financial sectors.
Household loan regulations are not limited to credit loans. Recently, as the chairman of the Financial Services Commission and the head of the Financial Supervisory Service are changing, omnidirectional loan regulation measures aimed at suppressing the increase in household debt are operating simultaneously. The basic framework is to comply with the financial authorities’ guideline in April to keep the growth rate of household loans within 6% per year. Accordingly, NH Nonghyup Bank suspended new housing mortgage loans from last week until the end of November, and the National Agricultural Cooperative Federation also suspended group loans for agricultural and livestock cooperatives. In addition, household financing conditions are changing rapidly, with Woori Bank suspending jeonse loans until the end of September.
The tightening of loan regulations is due to the continued increase in household debt and concerns about an ‘asset bubble’. In fact, the total amount of household loans in the banking sector in the first quarter was 1,660 trillion won, up nearly 10% from the previous year, exceeding the 6% management target for household loan growth set at the beginning of the year. During the same period, housing prices and the stock market soared. In particular, financial authorities are very concerned about the surge in loans in blind spots of DSR regulations, such as ‘Matong (negative bankbook)’.
We believe that suppression of household loans is inevitable as a soft landing measure in preparation for the crisis of a bubble burst at the end of the global ‘liquidity feast’ such as the US’ early tapering (reduction of asset purchases). The problem is that the lump-sum regulation may cause harm in good faith, or that borrowers who are in dire need of money in a crisis such as the self-employed will repeat ‘take an umbrella in the rain’. Financial authorities need to devise meticulous supplementary measures, such as bailout examinations for each use of funds, to prevent excessive blockade of loans at the actual loan window.
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