Even Internet Banks Hit by Loan Regulations... New Products Like Mortgage Loans Also Face Delays (Comprehensive)

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

The headquarters of Toss Bank in Gangnam-gu, Seoul.

[Asia Economy Reporter Jin-ho Kim] The intentions of internet-only banks have become complicated due to the government's comprehensive household loan volume regulation. Since they cannot handle corporate loans and only deal with household loans, growth constraints have become inevitable. In particular, concerns have arisen that the tightening of loan regulations next year may cause some disruptions to plans for launching new loan products.

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

KakaoBank has suspended high-credit personal loans and employee middle-ground loans since the 8th until the end of the year. Although the Jeonse deposit loans were recently resumed following the financial authorities' exemption policy from volume regulation, they are being operated with a daily application limit to control the pace. Applications are completely prohibited if the couple owns more than one house combined.

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

In the case of Toss Bank, loan handling was suspended until the end of the year less than a month after its launch. The loan limit of 500 billion won granted by the financial authorities was exhausted within 9 days of launch. Toss Bank requested an additional limit increase of 300 billion won, but the financial authorities rejected it, citing that there are no exceptions to the volume regulation principle.

The problem is that the impact of the volume regulation is absolutely greater on internet banks compared to commercial banks. Commercial banks have accumulated loan amounts far larger than 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 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.

Compared to commercial banks holding hundreds of trillions in loans, the loan scale of internet banks mostly ranges from several trillion to tens of trillions of won. Assuming about 5% annual growth is possible under volume regulation, commercial banks can conduct loan operations worth trillions of won annually, but internet banks' capacity is limited to several hundred billion won.

Launching new loan products such as mortgage loans is also a burdensome reality. Handling large-scale loan products is essential to continue growth, but next year the volume regulation is expected to be further tightened. Accordingly, internet banks are reportedly deliberating over the timing of launching major new products.

A financial sector official said, "Applying the same volume regulations to internet banks that have just started growing as 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 loan scale of each internet bank."