Internet Banks Ease Loan Ratio for Medium and Low Credit Borrowers to 'Average Balance 30%'

Loan Supply Plan for Low-Credit Borrowers Until 2026
Need to Manage Loan Soundness for Medium- and Low-Credit Borrowers
Inclusion of Personal Business Owner Credit Loans in Calculations

The government has set the loan supply target for medium- and low-credit borrowers at '30% or more' for next year for the three internet-only banks?KakaoBank, K Bank, and Toss Bank?and decided to switch the basis for stable management from 'end-of-period balance' to 'average balance.' In particular, it has decided to include personal business owner credit loans and guaranteed loans for low-income households in the calculation of the proportion of medium- and low-credit borrower credit loans to reduce the burden.

On the 27th, the Financial Services Commission and the Financial Supervisory Service announced the '2024?2026 Internet-Only Banks Loan Supply Plan for Low-Credit Borrowers' after consultations with the three internet-only banks. Since this is a more relaxed measure than the loan target ratio previously proposed by the financial authorities, it is expected to make it easier for internet banks to establish their loan plans.

The financial authorities first judged that, considering that the proportion of medium- and low-credit borrowers among all borrowers is 50%, the loan amount for medium- and low-credit borrowers is smaller than that for high-credit borrowers, and the need to manage the soundness of loans to medium- and low-credit borrowers, there is a limit to raising the target ratio above about 30%. Therefore, the loan target for 2024?2026 was set at '30% or more.'

Also, since the loan target reached about 30%, the 'end-of-period balance' basis was used to evaluate the medium- and low-credit borrower loan ratio target, but it was decided to switch to the 'average balance' basis. As of the end of November, the size of credit loans to medium- and low-credit borrowers was 30.1% for KakaoBank, 32.3% for Toss Bank, and 28.1% for K Bank. Although there is some gap with the targets submitted by each bank as their own plans, it is judged that the banks have achieved the intended results by approaching the 30% mark jointly set with the financial authorities by the end of this year.

Personal business owner credit loans and guaranteed loans for low-income households were also allowed to be included in the calculation of the proportion of medium- and low-credit borrower credit loans. This measure aims to encourage internet banks to more actively handle personal business owner credit loans and low-income household loans for medium- and low-credit borrowers. The financial authorities added, "To manage delinquency rates and supply loans to medium- and low-credit borrowers stably amid rising interest rates, we will continue to advance alternative credit evaluations," and explained, "We will also strengthen the fundamentals such as soundness and liquidity to ensure stable lending to medium- and low-credit borrowers."

KakaoBank plans to gradually increase the balance of medium- and low-credit loans over the next three years, expanding it to 5.23 trillion KRW by the end of 2026. It will redevelop credit evaluation models using medium- and low-credit borrower data, expand the use of alternative information including MyData, advance refinancing loan credit evaluation models considering changes in loan handling behavior, and enhance soundness and liquidity management through proactive provisioning, diversification of funding sources, and advanced management of non-performing loans.

Toss Bank plans to expand the balance of medium- and low-credit loans to 4.78 trillion KRW and improve the completeness and performance of credit evaluation models by applying AI-based credit modeling. It will enhance the assessment of personal business owners’ repayment ability using specialized alternative information and thoroughly manage soundness, including delinquency rates, non-performing loans, capital, and liquidity, in preparation for increased risks in medium- and low-credit loans. K Bank plans to expand the balance of medium- and low-credit loans to 2.77 trillion KRW, supplement specialized models based on telecommunications data, and introduce a personal business owner credit evaluation model based on card merchant information. It will strengthen soundness management such as delinquency rates and non-performing loan recovery activities and also expand capital.

The financial authorities stated, "KakaoBank, Toss Bank, and K Bank will disclose quarterly the supply of loans to medium- and low-credit borrowers, the advancement of CSS, and the implementation status of soundness management plans until the end of 2026," and added, "The authorities will monitor the implementation status and continue supervision and management, recommending improvements if necessary."