As expectations grow that financial authorities will move to further tighten lending, including by strengthening the debt service ratio (DSR), some commercial banks have already exceeded their annual household loan growth targets. As a result, concerns are rising that, toward the end of the year, lending capacity will shrink and a "loan famine" similar to last year's could emerge.
According to data obtained from the Financial Supervisory Service by the office of Lee In-young of the Democratic Party of Korea, a member of the National Policy Committee, on the 12th, the growth in household loans this year at NongHyup Bank and Shinhan Bank—two of the five major banks—has exceeded the "annual loan growth target (excluding policy products under business plans)" reported to the financial authorities.
NH NongHyup Bank proposed an annual household loan growth target of 212 billion won to the financial authorities, but as of the end of September, its household loan balance had already increased by 232.02 billion won from the end of last year (109% of the target). As of the end of Aug., the increase had swelled to 382.46 billion won (180% of the target), but the scale has since shrunk as the bank limited new loans and encouraged repayment of existing loans. Shinhan Bank likewise set this year's growth target at 163.75 billion won, but as of the end of last month, the increase had already reached 196.68 billion won (120% of the plan).
Other banks are in a similar situation. This year's increase in household loans at Hana Bank is 86.51 billion won, and at KB Kookmin Bank it is 171.11 billion won, reaching 95% and 85% of their targets, respectively.
Because of this, banks are suspending applications through loan broker channels to manage total volumes. Year-end is typically a period when demand for funds, including mortgage loans, surges, raising the possibility that a "loan cliff" will intensify. At the end of last year as well, banks closed non-face-to-face channels or raised lending rates by scaling back preferential rates to meet their total volume targets.
The growth in household loans at Saemaeul Geumgo has also exceeded the target submitted to the authorities. Saemaeul Geumgo has begun internal controls, such as suspending the acceptance of mortgage loan applications through loan brokers. According to the Bank of Korea's financial statistics system, Saemaeul Geumgo's household loan balance at the end of Jul. was 6.23 trillion won, up about 3.48% from the end of last year (6.02 trillion won).
Considering the overall growth rate (about 0.76%) of other mutual finance sectors such as agricultural and fisheries cooperatives and forestry cooperatives, this is conspicuously steep. Other mutual finance institutions such as credit unions and the savings bank sector are still being managed within targets, but their lending capacity is not ample.
Lee In-young said, "There are clear limits to managing household debt through simple total volume suppression," and added, "Rather than applying loan regulations such as the DSR uniformly, we need to prepare practical support measures such as tailored policy finance and easing interest burdens so that loan channels remain open for end users without dwellings and asset-vulnerable groups."