Financial Authorities Conduct On-Site Inspection of Household Loans at Internet Banks Including KakaoBank

Financial authorities are set to conduct on-site inspections of household loans at internet-only banks that have recently seen an explosive increase in mortgage loans. This is the first time the Financial Supervisory Service (FSS) is conducting on-site inspections of household loans at internet banks.

According to the financial sector on the 3rd, the FSS will carry out on-site inspections of household loans at KakaoBank from the 4th to the 7th, and at K Bank from the 11th to the 14th.

Toss Bank is excluded from this round of inspections as it does not handle mortgage loans. Toss Bank plans to launch jeon-wolse (monthly rent) loans this month and aims to start offering mortgage loans around the second half of next year.

The FSS is particularly focusing on the fact that mortgage loan screening at internet banks is conducted non-face-to-face. The FSS is reported to plan to closely examine whether credit screening and risk management are properly conducted according to loan regulations, and in the case of mortgage loans, whether the screening system is well implemented given the large amount of evaluation documents required.

The reason financial authorities are scrutinizing internet banks' mortgage loans is that KakaoBank and K Bank aggressively expanded their mortgage loan supply earlier this year.

Lee Bok-hyun, Governor of the Financial Supervisory Service, said last month, "Internet banks have a policy objective to supply funds to new filers (those with little financial transaction history), but there is a critical view on whether the current concentration on mortgage loans aligns with the system," adding, "This will also be part of the inspection."

According to the banking sector, KakaoBank's mortgage loan balance increased by 4.026 trillion KRW (30.3%) from 13.296 trillion KRW at the end of last year to 17.322 trillion KRW at the end of June. K Bank's mortgage loan balance also rose by 1.407 trillion KRW (61.4%) from 2.293 trillion KRW to 3.7 trillion KRW during the same period. In total, the two banks increased their mortgage loans by 5.436 trillion KRW in the first half of the year.

In response to the authorities' 'mortgage loan pressure,' internet banks are hastening to raise lending standards. KakaoBank introduced an age condition for its 50-year mortgage loan product on the 25th of last month and, starting from the 30th, restricted mortgage loans for housing purchase funds to those without home ownership.