The second financial sector to regulate household loan¡¦ DSR expansion from the second half of the year
Kim Dong Wook | east@ | 2018-04-17 09:49:56

The Korean government is expected to expand household loan regulation, such as DSR, from the second half of the year to the second financial sector, such as savings banks. With the spread of loan regulations to credit cards, insurance companies, savings banks, and other financial institutions, there has been concern that subprime mortgage loans have fallen sharply and delinquency rates have increased.

Besides, the financial authorities are planning to take a full-fledged approach to tightening household loans by selecting a financial company that will rapidly increase household lending as a centralized management company.

The Financial Supervisory Commission held a meeting on the management of household debt management at the Seoul government building on the 16th, attended by the heads of financial business associations, and announced plans to counteract household debt.

Chairman Choi stated, "We will raise the household lending growth rate to less than a long term trend (8.2%) this year," he said. "We stressed the stable management of household debt, minimized the risk factor by raising interest rates, and implemented follow-up measures.

The Financial Supervisory Service and Financial Supervisory Service (FSS) will expand the DSR, individual business operator lending guidelines, and loan rate regulation to second banking areas such as savings banks, Saemaul loans, and lenders to strengthen household lending.

DSR, which is a regulation that examines not only existing mortgage loans but also negative loans such as negative account books at the time of new loans, will start piloting in July and will be applied as a management index from the first half of next year. Considering that the banknotes began pilot operation in March and introduced indicators in October. It is time lag to minimize shock to the market.

Also, the guideline for individual lenders will be expanded to include savings banks and specialized financial institutions in October, beginning in July with mutual financing rights.

Accordingly, credit card companies, insurance companies, and savings banks, which have been free from lending restrictions, will be subject to all-inclusive regulations, such as narrowing the limit on loans and strengthening delinquency management.

Individual carrier lending guidelines will also be strengthened. The guideline includes the selection of three or more industries subject to self-management considering the size of lending and the growth rate of lending by financial companies and setting the credit limit for each type of business. The regulation on the loan-to-deposit ratio, which raises the risk weight of household loans and reduces corporate loan weights, will be applied to savings banks from 2020.

The financial authorities have decided to strengthen the credit review system. The credit review standards for financial institutions will be prepared by December, taking account of both the age of the borrower and the loan period. Non-small business mortgage loans that limit repayment responsibility to collateral liabilities when the borrower can not repay the loan will be introduced first in December this year to the housing finance corporation products such as Bogeumjari or eligible loans.

To ensure stable management of household debt, which has been on the decline, the bank has decided to set loan management targets for individual financial companies and financial companies to encourage them to achieve their goals.

In addition, the financial authorities are planning to manage financial companies with rapidly increasing lending as a centralized management company. We decided to implement a plan to reduce the supply of long-term and fixed-rate loan products by KRW 1 trillion every year and to link the amount of eligible loans with the results of covered bond issuance.

Based on this, the amount of eligible lending has been reduced from 12 trillion won last year to KRW 11 trillion this year, and 6 trillion won out of KRW 11 trillion will be linked with the results of covered banks` bond issuance.

Chairman Choi said, "The problem of household debt is a combination of financial, real estate, and consumption. Therefore, it is most important to consistently respond to the household debt problem with a long breath." The government should carefully and consistently I will respond."

By Kim Dong Wook east@


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