Five-Year Evaluation of Internet Banks... "Need to Change Target Criteria for Medium-Low Credit Loans"

Discussion Hosted by Rep. Yu Uidong
Strategies to Enhance Competitiveness
"Major Shareholders' Credit Provision Should Allow Fintech Investment"

There have been calls for regulatory easing measures, such as changing the target ratio criteria for mid-to-low credit loans and allowing the expansion of secured loans, to strengthen the competitiveness of internet-only banks.

Professor Kang Kyung-hoon of Dongguk University’s Department of Business Administration stated this on the 20th at the National Assembly Members' Office Building, Seminar Room 1, during the discussion forum titled "The Path Internet Banks Have Taken and the Way Forward," hosted by Yoo Ui-dong, a member of the People Power Party. Professor Kang said, “Internet banks have set target ratios for mid-to-low credit loans based on year-end balances from 2021 through this year, but the balance-based criteria are rigid and make ratio management difficult due to early repayments and other factors. It is necessary to change the criteria to be based on new loan origination amounts to flexibly reflect economic conditions.”

He also emphasized, “Expanding secured credit is necessary to actively promote because it provides a foundation to handle stable mid-to-low credit loans through the credit portfolio effect.”

There were also calls to ease regulations related to credit extensions to major shareholders and non-face-to-face transactions. Professor Kang said, “Currently, credit extensions to major shareholders are completely prohibited, but they should be allowed within 10% of equity capital. Additionally, relaxed standards should be applied to non-face-to-face concurrent businesses so that internet banks can expand their investment areas into funds, trusts, and gold investments.” Lawyer Kim Si-mok of the law firm Yulchon also stressed, “It is necessary to partially ease excessively strict regulations on prohibitions of credit extensions to corporations and major shareholders, as well as on non-face-to-face transaction methods, so that internet banks can better fulfill their roles.”

Regarding this, Shin Jin-chang, Director of the Financial Industry Bureau at the Financial Services Commission, said, “Internet banks contribute to improving financial convenience by providing simple and fast financial services through mobile apps, but there is a need to seek innovative services that differentiate them from commercial banks or reduce costs for financial consumers.”

Park Chung-hyun, Deputy Director of the Financial Supervisory Service, stated, “We will continue to pursue risk-focused supervision and inspections to ensure that the founding purpose of internet banks is properly realized and autonomous management is enhanced.”