The financial authorities have ordered the mutual finance sector, including NongHyup, the Saemaul Geumgo, and the Fisheries Cooperative, to manage this year's household loan growth rate within 2.8% to 3.8%. It has been about four years since the financial authorities specifically ordered a total household loan cap for the mutual finance sector.
According to the financial sector on the 16th, the financial authorities presented an upper limit for household loan growth rates this year for some central associations of the mutual finance sector. The financial authorities advised the National Agricultural Cooperative Federation to ensure that the annual household loan growth rate does not exceed 2.8%. For the Saemaul Geumgo, they communicated an upper limit of 3.8%, and for the Fisheries Cooperative, an upper limit of 3.0% for the first half of the year. This is the first time since July 2021 that financial authorities have directly proposed limits on household loan growth rates and ordered management in the mutual finance sector.
The 2.8% to 3.8% proposed by the financial authorities is aligned with this year's household loan management plan. The financial authorities set a goal to manage the overall household loan growth rate across all financial sectors within the nominal growth rate of 3.8%, applying this standard to the mutual finance sector. A financial authorities official noted, "Just like the banks, we ordered the mutual finance sector to manage the increase in household loans within the nominal growth rate."
The financial authorities required the central associations of the mutual finance sector to submit their annual household loan targets and management plans for this year. The annual household loan targets are estimates of the amounts that financial companies will handle for household loans over the year. Until now, only the banking sector has submitted annual household loan targets to the financial authorities, which has now been expanded to include the mutual finance sector. Receiving the household loan targets from financial companies is also a way for the financial authorities to pressure them not to increase household loans beyond a certain range.
This measure appears to be a proactive management step to prevent the balloon effect of household loans that occurred in the mutual finance sector in the latter half of last year. In August of last year, as banks tightened household loans, the loan demand shifted to the secondary financial sector. Household loans in the mutual finance sector increased by 4.8 trillion won in the fourth quarter of last year, representing the largest increase among the secondary financial sectors. Throughout the first to third quarters of last year, household loan balances in the mutual finance sector had been continuously declining.
Each central association is in agreement with the purpose of the household loan management policy and is in the process of submitting or drafting management plans. However, some have expressed confusion. An official from one mutual finance central association said, "It is surprising that even a small increase rate is alarming, but it is also bewildering to have the household loan growth rate set without any official documents, just through phone calls and emails." A financial authorities official stated, "These are details discussed through consultations with each mutual finance organization."