Commercial Banks and Internet Banks Alike Halt Lending One After Another...Concerns Over Year-End Loan Drought (Comprehensive)

KakaoBank Suspends High-Credit Personal Loans and Jeonse Deposit Loans
TossBank Uses Up 40% of Annual Loan Limit Within 3 Days of Launch

[Asia Economy Reporter Sung Kiho] Following commercial banks, internet-only banks are also shutting down their loan windows one after another. Due to the comprehensive pressure from financial authorities, not only the banking sector but also internet banks are simultaneously closing their loan doors. As the loan freeze becomes a reality, concerns are rising that the damage to actual borrowers who urgently need funds will increase.

According to the financial sector on the 9th, KakaoBank has decided to completely suspend new applications for credit loans to high-credit borrowers and jeonse/monthly rent deposit loans, following overdraft accounts, until the end of this year. The suspended products are ▲high-credit credit loans ▲Saitdol loans ▲jeonse/monthly rent deposit loans. Among credit loan products, applications for mid-credit loans, mid-credit plus loans, Sunshine Loan 15, and youth jeonse/monthly rent deposit loans are still possible. However, the number of applications allowed may vary depending on the situation. KakaoBank, which already stopped new overdraft loans from the 1st, explained that this measure was taken as part of household loan management. A KakaoBank official stated, "Considering the pace of loan growth, additional measures may be taken."

Toss Bank, which started operations on the 5th, is also highly likely to suspend loans this week. Toss Bank, which was ordered by financial authorities not to exceed a total loan amount of 500 billion KRW by the end of the year, has confirmed that more than 40%, or over 200 billion KRW, of loans were executed within just three days of its launch.

In the market, there is speculation that loan demanders flocked to Toss Bank immediately upon its launch due to the successive loan suspensions by commercial banks and KakaoBank. Especially, unlike other banks, Toss Bank's credit loan limit of up to 270 million KRW and overdraft limit of up to 150 million KRW were attractive. Although Toss Bank accepted applications sequentially despite having over one million pre-registrations considering these concerns, there are worries that this year's loan quota may be exhausted earlier than expected due to the surge in loans.

K Bank also reduced the limits on credit loans and overdraft accounts starting from the 2nd. The credit loan limit was lowered from 250 million KRW to 150 million KRW, and the overdraft and mid-interest credit loan plus were also reduced from 150 million KRW to 100 million KRW. There is also speculation that K Bank may soon reduce loan limits to within annual income.

The problem is that the tightening of loans in the financial sector is likely to intensify further. Financial authorities are expected to announce ultra-strong household debt measures within this month. Among the additional regulations, advancing the timing of strengthening the Debt Service Ratio (DSR) is being discussed. Currently, the DSR regulation applies to mortgage loans on houses exceeding 600 million KRW in all regulated areas or credit loans exceeding 100 million KRW. If the DSR regulation is strengthened, the scope will expand to include loans exceeding 200 million KRW in total.

Accordingly, the damage to actual borrowers facing the loan cliff can only increase. In particular, there are concerns that vulnerable groups who cannot obtain loans from banks or secondary financial institutions may be driven to illegal private loan markets.