The savings bank industry has faced disruptions in its household loan operations for mid-to-low credit borrowers due to the June 27 household loan regulations. As the government limits household credit loan amounts to 'within annual income,' savings banks that focus on credit loans for mid-to-low credit borrowers are inevitably affected.
Recently, the government decided to relax regulations on savings banks to promote the supply of financial services for the public, but there are concerns in the industry about 'policy discord.'
According to the financial sector on the 2nd, the savings bank industry is adjusting credit loan limits in response to the government's household loan regulations. Until now, savings banks have provided credit loans up to twice the annual income, but this regulation has changed the limit to 'within annual income.'
In fact, it has been reported that some savings banks have seen a significant decrease in loan approval rates after adjusting the limits. An official from one savings bank noted, 'As the government has interpreted card loans as credit loans, this has also been reflected in our system,' and added, 'Since first-tier financial institutions are also providing many mid-interest loans, there are many multiple borrowers already seeking savings banks. These individuals will see their limits significantly reduced.'
The savings bank industry, which has been struggling with management difficulties due to defaults in real estate project financing, expanded its operations focusing on mid-interest credit loans. In the first quarter of this year, the new handling amount of mid-interest credit loans by the savings bank sector, excluding certain loans, was 2.6577 trillion won, representing a 45.1% increase compared to the same period last year. Notably, the credit loan ratio of large savings banks operating mainly in the metropolitan area reaches 50-60%. If credit loan operations contract, a decline in the profitability of savings banks is inevitable.
Some have pointed out the government's policy discrepancies. The Financial Services Commission recently announced it would relax operational regulations for savings banks to promote 'the supply of financial services for the public.' The Commission is pursuing improvements in the calculation of credit ratios within operational areas and providing incentives for private mid-interest loans when calculating the loan-to-deposit ratio. Relaxing the credit ratio regulation within operational areas will allow smaller regional savings banks to conduct more credit loan operations in the metropolitan area.
However, since the June 27 household loan regulations are targeting the metropolitan area, it remains uncertain whether smaller savings banks will be able to increase their credit loans there, even if regulations are relaxed. On one hand, regulations for mid-interest loan supply are being relaxed for savings banks, while on the other hand, the limits on credit loans are being tightened.
An official from the savings bank industry stated, 'If the goal to reduce the overall household loan growth rate to around 50% is implemented from the second half of the year, it will be difficult to significantly increase mid-interest loans,' and added, 'It is understandable to apply comprehensive regulations out of concern for the balloon effect, but there is a need for precise regulations that suit the industry.'