Financial Services Commission: "DSR Standards Will Not Be Lowered... Targeted Regulation for Credit Loans"

Financial Services Commission Chairman Eun Sung-soo is seen conversing with ministry officials at the '9th Real Estate Market Inspection Meeting' held on the morning of the 28th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kangwook Cho] The Financial Services Commission (FSC) announced on the 28th that it is not considering lowering the average Debt Service Ratio (DSR) management standard for banks in relation to household debt management measures.

In a press release on the same day, the FSC explained, "If regulation on unsecured loans is necessary, it will be a targeted regulation," and added, "There has been no discussion at all about lowering the average DSR management standard from 40% to 30%."

FSC Chairman Eun Sung-soo met with reporters after the 5th Finance Day event held the previous day and said, "I fully support using the DSR system. However, we are internally discussing when and to what extent it should be applied."

As measures to strengthen DSR regulations, he mentioned ▲ lowering the average DSR management standard for banks from 40%, ▲ expanding the areas where borrower-level DSR applies, and ▲ lowering the housing price threshold for borrower-level DSR application.

Referring to these three measures, Chairman Eun said, "We are trying various approaches, considering which method can prevent speculative funds from going into home purchases without harming ordinary citizens and general demand."

Regarding this, the FSC explained, "While three measures to strengthen DSR can be considered, the intention was that lowering the overall DSR management standard to avoid harm to ordinary citizens is not being considered."

Meanwhile, DSR is an indicator that calculates the principal and interest repayment burden on all loans of a borrower during loan screening. It reflects the repayment burden of all financial sector loans, including mortgage loans, unsecured loans, and card loans. Currently, a DSR regulation of 40% (60% for non-bank sectors) is applied individually to new mortgage loans secured by houses priced over 900 million KRW in speculative areas and speculative overheating districts.