[10·26 Debt Measures] Ko Seung-beom "Household Debt Measures Unpopular but Financial Authorities Have Duty for Financial Stability"

Chairman Ko Announces 'Strengthened Household Debt Management Measures'
Focus on Establishing Repayment Ability-Centered Lending Practices

Financial Services Commission Chairman Ko Seung-beom listens to Deputy Prime Minister Hong Nam-ki's opening remarks at the 47th Emergency Economic Central Countermeasures Headquarters meeting held on the 26th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Kim Jin-ho] Ko Seung-beom, Chairman of the Financial Services Commission, emphasized on the 26th regarding the stringent 'Additional Measures on Household Debt' that "Although it is an unpopular policy that is difficult to welcome, it is the responsibility of the financial authorities to maintain financial stability." This is interpreted as actively expressing the inevitability of the measures to calm the increase in household debt and the accumulation of financial imbalances, thereby guiding the stable recovery and growth of our economy and finance.

Chairman Ko stated at the announcement of the 'Strengthened Household Debt Management Plan' held at the Government Seoul Office, "Both domestically and internationally, the gap between the real economy and finance, that is, financial imbalances, is accumulating and expanding. Above all, the most important thing now is the firm maintenance of financial stability."

Regarding the current situation, Chairman Ko diagnosed, "During the COVID-19 crisis, liquidity has increased sharply worldwide, causing a rapid rise in asset prices," and added, "The domestic real estate market is overheating, and the speed of debt increase is greatly exceeding the trend."

He expressed concern that the credit expansion phase has continued for a considerable period during the COVID-19 crisis, deepening the latent risks of household debt. He emphasized, "The need for preemptive measures against financial risks linked to asset price increases is growing," and "Now is the time to take proactive and strong action."

The core of the 'Strengthened Household Debt Management Plan' announced that day is a loan practice centered on repayment ability. Chairman Ko said, "The main principles of the additional measures are broadly threefold," and "Establishing loan practices centered on repayment ability and promoting installment repayment are the top priorities."

To this end, the Financial Services Commission will advance the phased implementation schedule of the borrower-level Debt Service Ratio (DSR) by more than six months earlier than originally planned for early enforcement. Additionally, the DSR standards for the relatively lax secondary financial sector have also been strengthened.

He also emphasized that expanding the installment repayment loan structure and suppressing balloon effects resulting from strengthened household debt management are key points.

However, considering concerns about damage to genuine demand borrowers, protective measures will be carefully considered. Chairman Ko said, "Flexible standards will be applied to jeonse loans and group loans," and "We will be careful to prevent any regulatory evasion that may occur during this process." He added, "Preferential policies for low-income and vulnerable groups will also be implemented without delay, and the supply of policy-based low-interest loans and mid-interest loans will be expanded."

Chairman Ko stated that starting with these additional measures, they will aim to stabilize the excessive increase in household debt. He said, "We will gradually narrow the significantly widened gap between the household debt growth rate and economic growth rate," and "By faithfully implementing these additional measures, we will stabilize next year's household debt growth rate at around 4-5%."

He added, "However, considering the real economy trends and financial imbalance situations, we will respond flexibly and elastically, and guide financial companies to prevent any loan suspensions."

He also hinted at the possibility of introducing stronger regulations if the additional household debt measures fail to achieve their effect. Chairman Ko said, "Due to increased uncertainty in global financial conditions, additional household debt measures are inevitable," and emphasized, "If necessary, we will consider implementing additional reviewable tasks that have been previously suggested at an appropriate time."

This content was produced with the assistance of AI translation services.