Financial Authorities Summon Savings Banks and Internet Banks Consecutively: "Manage Household Debt"

[Asia Economy Reporter Song Seung-seop] Financial authorities have recently summoned employees of savings banks and internet-only banks, reportedly urging them to manage the rising trend of household debt.

According to the industry on the 2nd, at the end of last month, the Financial Services Commission (FSC) called in representatives from SBI Savings Bank, Korea Investment Savings Bank, and Aequan Savings Bank. The FSC is said to have asked the representatives to limit the growth rate of household loans. It was reported that they inquired about the reasons for exceeding the annual household debt target and checked how they plan to manage it going forward.

On the 24th of last month, a representative from KB Savings Bank received the same request from the FSC. As of the first half of the year, KB Savings Bank’s household loan balance was 1.0567 trillion KRW, a 38.2% increase from 764.3 billion KRW at the end of last year. Financial authorities had recommended that the savings bank industry limit the household loan growth rate to around 21% year-on-year.

Currently, the household loan balance of savings banks stands at 36.0087 trillion KRW as of the end of June. This is a 14.0% increase compared to the end of last year. In just half a year, the industry has exceeded half of the target set by financial authorities. At this pace, it will surpass the total household loan limit set by the authorities.

The reason financial authorities are repeatedly summoning industry representatives is that under stringent regulations, some companies may enjoy windfall benefits. The total volume recommended by the FSC is at the overall industry level, not for individual companies. While most savings banks are restraining their lending operations, if some companies increase loans and gain significant profits, it becomes difficult to control.

Internet bank KakaoBank has also received the same request again from the FSC. In particular, KakaoBank must also meet the target ratio for mid-interest rate loans within its total loans. To achieve this, it may need to reduce the total volume of household loans, making preemptive management necessary.

Meanwhile, KakaoBank is reportedly given a higher target than the household loan growth limit level of commercial banks (5-6%). The monthly target growth rate reported to the authorities is currently considered satisfactory.