Starting in July, banks will not be able to reflect more than 50% of guarantee institutions' contributions when calculating the lending rate for guaranteed loans.
The Financial Services Commission said on the 3rd it will preannounce legislation for a partial amendment to the Enforcement Decree of the Banking Act with these details. Earlier, with the Banking Act revised at the end of last year, banks will be restricted from July 1 from reflecting legal expenses such as guarantee institutions' contributions when calculating lending rates.
The Banking Act stipulates that, for contributions to guarantee institutions such as Korea Credit Guarantee Fund (KODIT) and Korea Technology Finance Corporation (KOTEC), banks may not reflect in lending rates any rate exceeding the percentage set by presidential decree, within 50% of the contribution rate under the respective individual laws. This amendment to the enforcement decree is a follow-up measure that sets the specific percentage limit for reflecting contributions in lending rates.
In addition, if the loan is not guaranteed, contributions from guarantee institutions cannot be reflected in the lending rate. The Financial Services Commission (FSC) said, "The actual interest burden on borrowers such as small and midsize enterprises and small business owners who take guaranteed loans will be significantly eased." The draft amendment to the Enforcement Decree of the Banking Act will be implemented along with the Banking Act after a preannouncement of legislation through May 14 and a Cabinet meeting resolution.