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With the long-standing demand of the online investment-linked finance industry (On-tu-eop) for attracting investments from domestic financial institutions finally becoming possible, financial authorities and the savings bank industry are accelerating their efforts. The savings bank industry completed a demand survey at the end of last month and plans to apply for designation as an innovative financial service this month.
According to the financial industry on the 9th, the Korea Federation of Savings Banks conducted a "Demand Survey to Identify the Handling Demand for On-tu-eop Linked Investments" targeting its member companies from the 22nd to the 27th of last month. This survey was requested by the Financial Services Commission's Small Finance Division to the Federation to confirm the scale of companies interested in investing.
Despite the deteriorating business conditions in the savings bank sector, some large savings banks have expressed their willingness to participate. A representative from a major savings bank said, "We are still cautiously reviewing internally," but added, "We think it is not bad. We conveyed to the Federation that there is a demand intention." A Federation official stated, "We understand that several large savings banks are interested."
These savings banks view On-tu-eop linked loans as more beneficial than harmful. They cite the discovery of new fund management channels and the opportunity to acquire digital technology from On-tu-eop companies as reasons for the positive effects. There is also anticipation that the Financial Services Commission will exempt mandatory loan ratio regulations within business areas for linked loans. Under the current Savings Bank Act, savings banks in the metropolitan area are required to handle at least 50%, and those outside the metropolitan area at least 40%, of their loans within their business regions.
The savings bank industry plans to finalize participating companies by the end of this month and submit the application for innovative financial service designation. Additionally, they intend to operate a council centered on the savings banks that have expressed their intention to participate.
As financial authorities and the savings bank industry speed up, expectations for improvement in the On-tu-eop industry’s business conditions are growing. In a situation where economic recession, high interest rates, and high inflation have dampened investment sentiment, the inflow of funds from financial institutions can reduce funding costs and meet customer loan demand. With the allowance of investments not only from individuals, professional investors, and overseas financial institutions but also from domestic financial institutions, there are predictions that the industry can grow rapidly. A representative from the On-tu-eop industry forecasted, "Although tasks such as linking loan ledgers and developing computer networks remain, the industry atmosphere is expected to improve from May."
Meanwhile, the Financial Services Commission accepted the On-tu-eop industry's request last March and issued a legal interpretation allowing investments from financial institutions. In January, it decided to permit institutional investments only for On-tu-eop personal credit loans. Until now, conflicts among financial institution-specific sector laws made the execution of linked investments practically difficult. Accordingly, the authorities plan to alleviate regulatory burdens on linked investments with financial institutions such as savings banks through the designation of innovative financial services.
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