[Asia Economy Reporter Park Sun-mi] Office worker Kim Yujin (41, pseudonym) recently visited Bank A, which is located far from her workplace, during lunch break for a loan consultation. Although she could have applied for a loan non-face-to-face at her main bank, she went to another bank where she had pre-applied for a loan due to the atmosphere of loan suspension and limit reduction in the banking sector. It took about an hour from consultation at the counter to loan application. After mechanically signing dozens of times on documents the staff asked her to sign, Kim barely managed to secure the loan.
As banks raise the bar to manage total loan volume, the number of customers visiting banks in person is rapidly increasing rather than just clicking online. Although 100% non-face-to-face loans have become convenient due to the digital transformation of financial services at commercial banks, non-face-to-face services are gradually losing ground as financial authorities tighten household debt regulations.
According to the financial sector on the 20th, the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?plan to prohibit one-homeowners from receiving jeonse (key money deposit) loans through non-face-to-face methods starting from the 27th. Loans will only be possible after passing screening at the bank counter. The strategy is to screen out people who take jeonse loans for real estate gap investment or invest in stocks and coins through face-to-face applications.
At a review meeting on real demand loans held on the 14th by financial authorities and the five major commercial banks, it was shared that it is difficult to identify real demand borrowers through non-face-to-face loan methods. However, it is uncertain whether the suspension of non-face-to-face jeonse loans will spread to other regional banks and internet banks beyond the five major banks. This is due to opposition from some internet-only banks at a working-level meeting on jeonse loan management measures held on the 18th involving all banks.
There is also a sense that non-face-to-face loan windows are closing first at commercial banks. Hana Bank stopped selling its non-face-to-face loan products, ‘Hana OneQ Credit Loan’ and ‘Hana OneQ Apartment Loan,’ from 6 p.m. the previous day. The suspension of non-face-to-face loans will continue at least until the end of the year while monitoring the situation of household loan growth calming down. KB Kookmin Bank has not sold its KB Star Credit Loan, a loan product that boasted low interest rates exclusively for non-face-to-face, since last month. A KB Kookmin Bank official explained, "With the implementation of the all-in-one household loan process, the product lineup for online and offline has been unified, ending the sale of non-face-to-face exclusive products."
Early repayment penalties (fees), which had been exempted for non-face-to-face loan products as part of customer acquisition competition, are now being introduced. Shinhan Bank recently decided to impose early repayment penalties on non-face-to-face credit loans as well, charging 0.8% of the loan amount for fixed interest rates and 0.7% for variable interest rates, similar to face-to-face credit loan products. Earlier, Woori Bank also applied early repayment penalties of 0.6% for variable interest rates and 0.7% for fixed interest rates on its non-face-to-face credit loan products ‘Woori WON (Workplace Loan)’ and ‘Woori Main Workplace Loan (Internet)’ starting from July.
'Fast and Convenient' Non-face-to-face Loans... Non-face-to-face Loan Balance of 111.78 Trillion Won in the First Half
The activation of non-face-to-face loans, which allow borrowing money without visiting a bank counter, is considered a major factor in the increase of household debt.
According to data obtained by Min Hyung-bae, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, through the Financial Supervisory Service, the balance of non-face-to-face loans at 18 domestic banks as of the first half of this year was 111.7828 trillion won, about 2.8 times the 39.4093 trillion won at the end of 2017. Among banks, the internet bank KakaoBank had the largest non-face-to-face loan balance (23.1265 trillion won). However, commercial banks also performed well by offering interest rate benefits and 100% non-face-to-face processing convenience, including Hana Bank (22.5726 trillion won), Woori Bank (21.568 trillion won), and Shinhan Bank (17.5339 trillion won).
In the market, there is a growing sentiment that banks will find it difficult to continue focusing on non-face-to-face loans as long as financial authorities keep tightening loan regulations. According to the ‘Financial Institution Lending Behavior Survey’ announced by the Bank of Korea, the domestic banking sector’s expected credit risk index for the fourth quarter rose to 20, up 10 points from 10 in the third quarter. The bank lending attitude index dropped to -12, entering negative territory. This means banks have no choice but to tighten loan screening and raise loan thresholds.
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