Internet Banks Struggle Under Total Household Loan Volume Regulation

Growth Constraints Inevitable Due to Total Volume Regulation
Plans for New Loan Product Launch Also Expected to Face Setbacks

[Asia Economy Reporter Jin-ho Kim] The intentions of internet-only banks have become complicated due to the government's comprehensive household loan volume regulations. Since they cannot handle corporate loans and only deal with household loans, growth has inevitably been constrained. In particular, concerns have arisen that loan regulations will tighten further next year, potentially causing some disruptions in plans to launch new loan products.

According to the financial sector on the 27th, as a result of the household loan volume regulations, Kakao Bank, K Bank, and the recently launched Toss Bank have either suspended or significantly reduced some loans.

Kakao Bank has suspended high-credit personal loans and employee Saetdol loans from the 8th of this month until the end of the year. Although the Jeonse and monthly rent deposit loans were recently resumed following the financial authorities' exemption from volume regulations, the bank is limiting the number of applications accepted per day to control the pace. Applications are completely prohibited if the couple holds more than one house in total.

K Bank, which began full-scale operations this year, still has some capacity and has not suspended loans but has reduced limits. K Bank operates by limiting personal loan amounts to within annual income, following the financial authorities' recommendations.

Toss Bank, less than a month after its launch, has suspended loan handling until the end of the year. The loan limit of 500 billion KRW granted by the financial authorities was exhausted within nine days of launch. Toss Bank requested an additional limit increase of 300 billion KRW, but the financial authorities rejected it, citing no exceptions to the volume regulation principle.

The problem is that the impact of volume regulations is absolutely greater on internet banks compared to commercial banks. Commercial banks have accumulated loan amounts far exceeding those of internet banks and are not subject to regulations on corporate loans, so securing profitability is not a major issue.

On the other hand, internet banks that only handle household loans are truly distressed. Most have been established for less than five years but are subject to the same volume regulations as commercial banks, causing significant damage to their growth potential. In fact, the international credit rating agency Fitch Ratings recently forecasted that the growth of internet banks could be constrained in the short term due to household loan volume regulations.

Launching new credit products such as mortgage loans is also a burdensome reality. Handling large-scale credit products is essential to continue growth, but volume regulations are expected to tighten further next year. Accordingly, internet banks are reportedly deliberating over the timing of major new product launches.

A financial sector official said, "Applying the same volume regulations to internet banks that have just started growing as to commercial banks may feel harsh," adding, "Considering their active contribution to revitalizing mid-interest loans this year, it would be desirable to apply volume regulations that take into account the credit scale of each internet bank."