Joint Briefing Remarks by Relevant Ministries on Real Estate Market Stabilization
[Asia Economy Reporter Jin-ho Kim] Eun Sung-soo, Chairman of the Financial Services Commission, emphasized on the 28th that regarding the recent surge in secondary financial sector loans, "We will regularly monitor market conditions and actively respond to prevent market distortions caused by regulatory arbitrage."
Chairman Eun made these remarks while attending a joint briefing of related ministries for 'Real Estate Market Stabilization' held at the Government Seoul Office in the morning. He stated, "We will thoroughly manage the increasing household loans in the secondary financial sector," and diagnosed, "There is concern over the expansion of secondary financial sector loans exploiting the differences in regulations among financial sectors."
This message indicates that the Financial Services Commission will not overlook the increasing number of borrowers who, due to the higher loan limits in the secondary financial sector with higher interest rates compared to banks, take loans from banks and additionally borrow from savings banks or others in accordance with the Debt Service Ratio (DSR) standards. It is known that the FSC is considering strengthening the DSR for the secondary financial sector from the current 60% to 50%.
Chairman Eun also expressed concern that the rapid increase in private debt and overheating in some asset markets could expand vulnerabilities throughout the economy. He said, "If asset market price adjustments coincide with the global interest rate hike, vulnerabilities could appear across the economy," and added, "We will more meticulously monitor and manage household debt, which is pointed out as a potential risk factor for our economy."
He emphasized, "We will ensure that the borrower-level Debt Service Ratio (DSR) is properly established in the field," and "Taking the opportunity of expanding DSR implementation, we will root out the lending practice of lending only as much as can be repaid."
He continued, "We will suppress asset market investment demand that uses excessive leverage and ensure that the increased liquidity in the market flows into productive sectors and support for the ordinary economy rather than the real estate market."
Chairman Eun also stated that the household debt growth rate this year will be controlled at around 5-6%. This reflects a firm commitment to curb household debt despite criticism and side effects for the sound and sustainable growth of our economy.
He said, "In managing market liquidity, funding supply to self-employed and small business owners whose sales and credit ratings have declined due to COVID-19, and to genuine homebuyers without housing speculation, will continue, but real estate-related loans unrelated to genuine demand will be more thoroughly monitored and supervised."
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