April 4 Household Loan Real Demanders On-site Meeting
"Concerns Over Balloon Effect... Unified Effort Needed Across All Financial Sectors"
Lee Bok-hyun, Governor of the Financial Supervisory Service, is attending and speaking at the on-site meeting for household loan borrowers and experts held at KB Kookmin Bank in Yeouido, Seoul, on the 4th. Photo by Jo Yong-jun jun21@
Lee Bok-hyun, Governor of the Financial Supervisory Service, emphasized on the 4th that "the average monthly repayment amount of mortgage loans in the banking sector is estimated to be about 12 trillion KRW," and added, "If funds are prioritized for borrowers with genuine demand, it will be possible to manage the loan scale while continuously supplying funds to those with real needs."
Governor Lee made these remarks during a morning meeting held at the KB Kookmin Bank headquarters in Yeouido, Seoul, attended by financial consumers, market experts, and financial sector associations to discuss recent household loan management. This came amid growing concerns that the strengthened management of household loans by banks could negatively affect genuine borrowers, creating unintended victims.
He explained, "While it is desirable to strengthen management of speculative demand loans such as gap investments, careful management is needed to avoid restricting genuine loan demand," and added, "In particular, exceptions should be recognized to protect customer trust for cases where loan applications were submitted or contracts signed before banks' autonomous screening measures were strengthened."
However, he warned against the so-called 'balloon effect,' where tightening loans in one financial company leads to loan demand shifting to others. Governor Lee stated, "Currently, financial authorities are operating a system to monitor the status of mortgage loans in insurance and mutual finance sectors on a daily basis to prevent the balloon effect," and urged, "Not only banks but also insurance companies, small and medium financial institutions, and the entire financial sector should work together to manage this."
In this context, since the 3rd, Samsung Life Insurance has decided to restrict mortgage loans for homeowners for the first time in the insurance sector and notified each branch, and this is expected to expand to other insurance companies and the broader secondary financial sector.
Governor Lee added, "The financial authorities will firmly maintain the household loan management stance and plan to implement the second phase of the stress total debt service ratio (DSR) from September," and further stated, "We will also proceed without delay with the ongoing restructuring of real estate project financing (PF) and early normalization of distressed projects."
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