Financial Authorities Likely to Delay Immediate Credit Loan Regulations, Urge Financial Firms to Self-Regulate (Comprehensive)

Financial Authorities Concerned About Increase in High-Amount Credit Loans
Son Byung-du "Will Prepare Management Measures If Necessary"
"Must Be Aware of Risks of Reckless 'Debt Investment' and Overseas Stock Investment"

Son Byung-du, Vice Chairman of the Financial Services Commission, is conducting a Financial Risk Response Team meeting via a non-face-to-face video conference at the Government Seoul Office in Jongno-gu, Seoul on the 23rd.

[Asia Economy Reporter Kangwook Cho] As financial authorities are reportedly considering measures to tighten the rapidly increasing credit loans, Sohn Byung-doo, Vice Chairman of the Financial Services Commission, indicated that for the time being, they will leave it to banks to manage autonomously. This breaks the market expectation that regulations on credit loans, mainly targeting high-income and high-credit borrowers, would be announced as early as this week, instead opting to let banks manage the situation themselves. However, Vice Chairman Sohn left room for introducing management measures if household loan instability continues, while warning about the risks of debt-financed investment (debt investment) and overseas stock investment.

On the 23rd, Sohn Byung-doo, Vice Chairman of the Financial Services Commission, said, "Concerns have been raised about whether the increase in household loans is excessively flowing into specific asset markets," adding, "If factors causing household loan instability persist, we plan to prepare necessary management measures."

At the Financial Risk Response Team meeting held via video conference that day, Vice Chairman Sohn stated this and emphasized, "We will closely monitor the trend of household loans due to the recent surge in credit loans."

Regarding the recent surge in credit loans, he said, "It is difficult to accurately analyze the causes of the increase because it is hard to verify the purpose of use," but estimated, "The increased demand for living expenses from individuals and sole proprietors struggling due to COVID-19 contributed to some extent, and some of it likely flowed into asset markets."

He added, "Recently, there is a tendency for large loans centered on high-income and high-credit borrowers to increase somewhat rapidly," and urged, "Banks and other financial institutions should make efforts to manage the soundness of household loans by checking whether they sufficiently consider the borrower's repayment ability during loan screening."

Vice Chairman Sohn also pointed out the issue of individual investors' 'debt investment.' He said, "There are many concerns about the recent rapid increase in stock investments through loans by individual investors, so-called 'debt investment,' and direct investment in overseas stocks, which have low information accessibility and are exposed to currency risk," adding, "I hope everyone will once again keep in mind the risks that can arise from reckless stock investments through loans or overseas investments made without sufficient information."

During the meeting, there was also time to review the financial market situation with market experts. Vice Chairman Sohn said, "The corporate bond and short-term money markets are gradually calming down, centered on high-quality bonds, so the possibility of liquidity tightening is assessed to be low." He continued, "Monitoring of money market funds (MMFs), non-investment grade bonds, and foreign investor trends is necessary, and we will be fully prepared for the possibility of expanding instability factors through market stabilization measures."