The financial authorities decided to demand tighter controls from banks where unsecured lending has surged. As the "debt investing" frenzy continues on expectations of a rise in domestic stock prices, the outstanding loan balance of unsecured loans at the five major banks has increased by 1.6 trillion won so far this month.
According to the financial sector on the 15th, the financial authorities plan to summon banks that have exceeded or approached their monthly household loans targets starting this week to review measures to curb the growth of unsecured loans.
With recent gains in domestic stock prices, investors are using overdraft accounts and unsecured loans to invest in stocks. In response, the financial authorities will check, on a weekly basis, banks' household loans growth targets set at the start of the year and will impose uniform restrictions if the growth in unsecured loans continues.
The rise in unsecured loans across the banking sector is being driven by major commercial banks. As of the 11th, the five major banks' outstanding loan balance of unsecured loans stood at 108.1379 trillion won, up 1.6226 trillion won from the end of the previous month. During the same period, mortgage loan balances increased by 989 billion won. It is unusual for unsecured loans to grow more than mortgages.
Banks are said to have conveyed to the financial authorities measures to curb unsecured loans, including lowering the loan limit for new unsecured loans to high earners, reducing limits when extending maturities, and encouraging repayment of existing loans.
Banks have already begun to moderate the pace of unsecured lending in line with the financial authorities' policy. KB Kookmin Bank will cap the maximum limit for general unsecured loans at 100 million won starting on the 16th and lower the maximum limit for overdraft accounts to 50 million won.
Shinhan Bank decided that starting today, if the combined daily intake of face-to-face and non-face-to-face unsecured loan applications exceeds its internal control threshold, it will restrict non-face-to-face unsecured loan applications. For household unsecured loans with a contracted amount exceeding 30 million won, it will reduce the limit by up to 20% upon maturity extension for overdraft accounts (limit loans). Woori Bank has halted intake of non-face-to-face unsecured loan refinancing applications via loan comparison platforms.
The financial authorities are also said to be set to order strengthened oversight for regional banks and internet-only banks. The concern is that as commercial banks raise the bar for unsecured loans, demand could shift to regional or internet banks. A commercial bank official said, "If the rise in unsecured loans is not contained, we may have to take drastic steps, such as temporarily suspending new loans."