Online Banks Struggling with Loan Regulations... "More Worried About Next Year"

High-credit borrowers' loans halted under total volume regulation
Increase in loans for mid-to-low credit borrowers remains a challenge

The third internet bank, Toss Bank, scheduled to launch on the 5th, is drawing attention from the banking sector. It has announced the release of groundbreaking interest rate products even before its launch, including the highest deposit interest rate in the banking sector at 2% per annum and a minimum loan interest rate in the high 2% range, causing not only other internet banks but also commercial banks to become tense. Especially as financial authorities tighten regulations on household loans, leading to rising loan interest rates and restrictions on loan limits, Toss Bank has announced unsecured loans with a maximum limit of 270 million won, raising expectations that demand from 'loan refugees' will surge. The photo shows the Toss Bank headquarters in Gangnam-gu, Seoul, on the 4th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Kiho Sung] Internet-only banks are facing a major dilemma due to financial authorities' regulations on household loans. Following the authorities' policy, they have recently been suspending loans to high-credit borrowers one after another. At the same time, they need to increase loans to low- and medium-credit borrowers to keep the promises made at their launch, raising concerns that their growth momentum is at risk.

According to the financial sector on the 23rd, KakaoBank, K Bank, and Toss Bank are struggling to secure high-credit borrowers as they suspend or reduce some loans. KakaoBank has suspended high-credit personal loans and employee Saetdol loans until the end of the year. However, it has decided to resume new loans for jeonse and monthly rent deposit loans recently, following the Financial Services Commission's policy. K Bank has reduced the credit loan limit to within annual income.

The situation of Toss Bank, which launched on the 5th of this month and declared a loan suspension on the 14th, is even more serious. It exhausted most of its initially set loan limit of 500 billion KRW within just nine days of launch. Toss Bank requested a limit increase of 300 billion KRW from the financial authorities but was rejected. The industry expects that unless there is a special change in the authorities' stance, Toss Bank's loan suspension will continue until the end of this year.

However, loan operations for low- and medium-credit borrowers are still being maintained. KakaoBank, K Bank, and Toss Bank have the task of increasing the proportion of loans to low- and medium-credit borrowers to 20.8%, 21.5%, and 34.9%, respectively, by the end of the year.

Internet banks are focusing on loans to low- and medium-credit borrowers as required by the authorities, but they seem to be struggling because they cannot secure high-credit borrowers who are more profitable. An official from an internet bank said, "Although loans to low- and medium-credit borrowers are the founding goal of internet banks, internet banks also need profits to further expand loans to these borrowers," adding, "We need to consider excluding low- and medium-credit loans from the total loan volume regulation or excluding refinancing loans (loan switching) from the total loan volume regulation, rather than creating new loans."

Internet banks are more worried about the period after this year. If financial authorities apply the same regulations limiting loan volumes, such as the '5% total volume regulation,' to internet banks, their growth potential will be severely impacted. Another internet bank official expressed concern, saying, "The 5% for commercial banks and the 5% for internet banks are different in scale," and "Applying the same regulation will ultimately have a negative effect on the growth of internet banks."