Financial Services Commission: "No Suspension of Jeonse Loans"... For Now, 'White Flag' to Political Circles and Public Opinion (Comprehensive)

President Moon and Ruling Party Finally Withdraw Plan to Strengthen Regulations on Actual Buyers Due to Public Opinion
Chairman Ko Seung-beom: "Total Volume Regulation on Jeonse Loans Will Be Applied Flexibly"
Monitoring Group Loans Issue... "Will Ensure No Problems"

Financial Services Commission Chairman Ko Seung-beom is answering questions from the press after the opening ceremony of the investor education platform 'R2 Plus' held at the Korea Financial Investment Association in Yeouido, Seoul on the 14th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jin-ho Kim] Ko Seung-beom, Chairman of the Financial Services Commission, has effectively withdrawn the previously announced plan to strengthen 'real demand regulations' such as jeonse loans. This came after pressure from President Moon Jae-in, ruling party lawmakers concerned about harm to real demand borrowers, and public opinion, ultimately leading him to surrender. Chairman Ko also clearly stated that even if the increase in jeonse loans makes it difficult to achieve this year's household debt growth target of the 6% range, he would temporarily allow it.

On the 14th, Chairman Ko told reporters at the Korea Financial Investment Association in Yeouido, Seoul, "We will ensure that there will be no suspension of jeonse loans and group loans until the end of the year."

Chairman Ko said, "We recognize recent concerns related to real demand borrowers," and added, "We will apply total volume regulations flexibly for jeonse loans until the end of the year." He continued, "Even if household debt increases beyond the 6% range this year due to the rise in jeonse loans, we plan to temporarily tolerate this."

Regarding group loans, he said, "We judge that there is no supply problem, but some projects may face difficulties," and promised, "We will monitor together with the Financial Supervisory Service and the Korea Federation of Banks to prevent any issues."

The Financial Services Commission has emphasized maintaining this year's household debt growth target at the 6% level. Chairman Ko also expressed at last week's National Assembly audit that regulation of 'real demand loans' is inevitable to achieve the target.

However, Chairman Ko changed his stance within just one week. Considering many concerns related to real demand borrowers, he decided to apply total volume regulations flexibly for jeonse loans. It is analyzed that recent pressure from President Moon and the ruling party leadership, as well as growing negative public opinion on loan regulations, influenced this decision.

However, Chairman Ko specified that the flexible application of total volume regulations for real demand loans is 'temporary.' He said, "The temporary allowance for jeonse loans refers to until the end of the year," and added, "We will decide later on how to proceed next year."

He also mentioned the upcoming additional household debt measures. Chairman Ko said, "The additional measures will mainly focus on strengthening the effectiveness of the Debt Service Ratio (DSR) management, jeonse loans, and loans from secondary financial institutions," and added, "They will comprehensively include financial companies' household debt management plans and real demand borrower protection measures." The additional household debt measures are expected to be announced as early as next week.

Furthermore, he stated that strict management of comprehensive household debt excluding real demand loans will continue as emphasized so far. He said, "My view that managing household debt is the most important remains unchanged," and added, "The principle that loans must be made within the repayment capacity will be maintained next year and beyond." The Financial Services Commission plans to tighten next year's household loan growth target to the 4% range, stricter than this year.

Meanwhile, financial authorities plan to call practical staff from the five major commercial banks for discussions on additional household debt measures on the same day. The meeting is expected to mainly discuss the current status of household loan increases at each bank and management plans for jeonse loans. The financial authorities are expected to seek opinions from the banking sector on ways to suppress jeonse loans as much as possible without harming real demand borrowers.