Financial Supervisory Service Governor Lee Chan-jin ordered front-line staff to thoroughly check for any cases of individual business loans being diverted for nonintended purposes and to take strict measures, including immediate loan recall upon confirmation.
At an executives meeting of the Financial Supervisory Service (FSS) on the 23rd, Lee stated accordingly that, in addition to auction balance loans and farmland collateral loans, rigorous inspections and follow-up management are needed for the three Gangnam districts, where the risk of diversion is high, and for secondary financial institutions. An auction balance loan refers to a loan taken to pay the remaining balance within the deadline after winning a real estate property at auction. The FSS believes many are registering fake businesses to use individual business loans to evade lending regulations that apply to auction balance loans.
The FSS conducted on-site inspections after the June 27 lending rules in June last year and found that 127 out of about 20,000 individual business loans, totaling 58.8 billion won, were used for nonintended purposes. The FSS recalled 91 loans totaling 46.4 billion won and recorded the relevant facts with the Credit Information Services. If listed as a "financial order violator" with the Credit Information Services, new loans from financial companies can be restricted for up to five years.
The FSS plans to strictly discipline financial company executives and employees, as well as loan brokers, in accordance with relevant laws if diversion for nonintended purposes is detected. In particular, if among multiple-home owners those with dwellings in the three Gangnam districts used them as collateral for business loans, the agency plans to notify investigative authorities.
The FSS inspected compliance with disposition covenants, bans on additional dwelling purchases, and move-in covenants in the second half of last year, uncovered 2,982 violations, and is carrying out follow-up measures.