Financial Services Commission to Hold Practical Team Leader-Level Household Debt Meeting on 14th for Mutual Finance, Insurance, Savings Banks, etc.
Second-Tier Financial Sector Proposes Eliminating Interest-Only Grace Period and Suspending Mortgage Loans for Multi-Homeowners
As banks raise the threshold for household loans, causing loan demand to surge in the secondary financial sector?a so-called 'balloon effect'?financial authorities are convening industry sectors one after another to discuss countermeasures. The secondary financial sector proposed measures such as restricting interest-only grace periods, and the financial authorities agreed to bring these proposals to the table for discussion.
According to the secondary financial sector on the 16th, financial authorities held a household loan review meeting for over an hour with team leaders from mutual finance, insurance companies, savings banks, and specialized credit finance companies. At this meeting, the secondary financial sector shared three measures to curb loan demand as a follow-up to the 'Household Debt Review Meeting' chaired by Kwon Dae-young, Secretary General of the Financial Services Commission, held on the 11th.
A representative from the secondary financial sector explained, "Following the Financial Services Commission's directive at the review meeting to closely monitor trends in the secondary financial sector and take action, we presented several measures to the financial authorities," adding, "We plan to continue communication with the authorities regarding these measures."
The core of the measures proposed by the secondary financial sector to suppress the balloon effect includes restricting the handling of grace-type products where only interest is paid and principal is deferred, and banning mortgage loans to multi-homeowners. It also includes stopping the subscription to mortgage insurance (MCI·MCG) for mortgage loans to prevent multi-homeowners from obtaining additional loans.
The three measures proposed by the secondary financial sector to the authorities have been applied since August, starting with banks and large insurance companies. Subsequently, as concerns about the 'balloon effect' grew, the secondary financial sector, which had been monitoring the household loan situation, decided to actively review these measures.
A financial authority official explained, "Since September, we have been monitoring the household loan situation in the secondary financial sector on a daily and weekly basis, and since there had been no separate discussions with the industry sectors, we shared the current situation and listened to the measures proposed by the industry."
Since the implementation of the second phase of the stress total debt service ratio (DSR) measures in September, the increase in household loans recorded 5.2 trillion won, down by more than 4.5 trillion won compared to August. However, considering the Chuseok holiday period, it is still too early to be reassured. The increase in household loans in the secondary financial sector also shifted from a 500 billion won increase to a 500 billion won decrease during the same period, but loan growth was noticeable mainly among large insurance companies and Saemaeul Geumgo.
In particular, the reduction in secondary financial sector loans last month was significantly influenced by the effect of loan write-offs. As part of the financial authorities' soundness management requirements, the secondary financial sector is actively processing loan receivables as losses. Although the loan increase appears to have slowed on the surface, the reality may be different.
It is also reported that the review meeting urged more active communication. This is interpreted as concern over the continued concentration of household loans, especially centered on mutual finance institutions such as Saemaeul Geumgo. Saemaeul Geumgo's mortgage loans increased by about 200 billion won over the past two months, mainly in the Seoul metropolitan area.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
