[10·26 Debt Measures] Go Seung-beom: "No Harm to Ordinary People from DSR... Jeonse Loans Excluded Next Year as Well" (Comprehensive)

Tightening Loans Across the Board... Financial Services Commission Chairman Warns of Excessive Concerns Over Impact on Ordinary Citizens

Financial Services Commission Chairman Ko Seung-beom is holding a briefing on measures to strengthen household debt management at the Government Seoul Office in Jongno-gu, Seoul, on the morning of the 26th. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Kim Jin-ho] Ko Seung-beom, Chairman of the Financial Services Commission, said on the 26th regarding the additional household debt measures centered on strengthening the borrower-level Debt Service Ratio (DSR) regulations, "I believe there will be no harm to low-income and vulnerable groups."

Chairman Ko stated this during a meeting with reporters after the '6th Financial Day Commemoration Ceremony' held at Post Tower in Jung-gu, Seoul, saying, "Even if the borrower-level DSR regulation is advanced, the proportion of borrowers subject to this regulation is not high, so it is expected that there will be no significant problems in loan usage for low-income and vulnerable groups."

This is interpreted as a rebuttal to market concerns that strengthening borrower-level DSR regulations would make it more difficult for low-income and vulnerable groups to access loans. According to the FSC, borrowers with total loans exceeding 200 million KRW, who fall under the second stage of borrower-level DSR, account for 13.2% of all borrowers, and those with total loans exceeding 100 million KRW, corresponding to the third stage, are expected to be 29.8%. Since the proportion of these borrowers does not exceed 30% of the total, the FSC analyzes that the possibility of low-income individuals being directly impacted is low.

He also emphasized that the newly prepared protection measures for actual demand borrowers support this view. Chairman Ko explained, "Considerations will be given to jeonse loans and balance payment loans, and if there is actual demand such as marriage funds in unsecured loans, measures will be taken to accommodate these. We will manage this well on a quarterly basis from the beginning of the year to ensure that loans are not abruptly stopped."

He also indicated that the DSR regulation will not be applied to jeonse loans next year. He said, "We are currently thinking of not activating the DSR for jeonse loans next year," adding, "Additionally, interim payment loans and loans from the microfinance sector will also not be included in the DSR calculation."

However, contrary to Chairman Ko's remarks, the additional measures include a significant strengthening of the DSR standards for the secondary financial sector, which is mainly used by banks as well as low-income and vulnerable groups, starting from January next year. This ultimately means that low-income households will inevitably face reduced loan limits across all financial sectors.

Chairman Ko clearly expressed a strong determination to stabilize the excessive increase in household debt starting with these additional measures. He said, "We will gradually narrow the gap between the household debt growth rate and economic growth rate, which has significantly widened," and added, "We will implement these additional measures without fail to stabilize the household debt growth rate at around 4-5% next year."

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

When asked about his thoughts on the additional household debt measures, he responded, "The time has come to strengthen household debt management," adding, "The need for preemptive responses to financial risks linked with rising asset prices is increasing. Now is the time for proactive and strong measures."

Meanwhile, the FSC announced on the same day the 'Additional Household Debt Measures,' which focus on advancing the phased implementation schedule of borrower-level DSR regulations by more than six months earlier than originally planned. The additional measures also include strengthening the relatively lax DSR standards for the secondary financial sector, expanding installment loan structures, and measures to suppress balloon effects caused by strengthened household debt management.