Financial Services Commission in 'Cautious Mode' for Household Loan Management... Kim Byunghwan Says "Not Trying to Create a Minus"

Kim Byung-hwan, Chairman of the Financial Services Commission Monthly Press Briefing
"Implementing DSR on Jeonse Loans is Difficult... Only Discussed in Previous Governments"
"HUG's Issuance of New Capital Securities is Different from Policy Loan Funds"
"Revised Early Repayment Fee Rate Expected to be About Half of Current Level"

The 9th Financial Day commemorative ceremony was held on the 29th at the FKI Tower in Seoul. Lee Bok-hyun, Governor of the Financial Supervisory Service (left), and Kim Byung-hwan, Chairman of the Financial Services Commission, are seated.

On the 30th, Kim Byung-hwan, Chairman of the Financial Services Commission, expressed a more cautious stance on household debt management, stating, "The goal is not to make household loans negative, but appropriate management is important." At a press briefing held at the FSC that day, Chairman Kim forecasted, "The increase in household loans in October is expected to be higher than in September, but the extent will not be large." In particular, although it has already been confirmed that loans in the secondary financial sector have increased in October compared to September, he refrained from commenting on what measures might be taken.

Regarding the previous day's move by the FSC to block HUG (Housing and Urban Guarantee Corporation) from issuing new capital securities, which sparked another evaluation of 'policy misalignment' with the Ministry of Land, Infrastructure and Transport, he explained, "It is a process of negotiating the contents of the securities registration statement for recruiting general investors for capital expansion purposes," and added, "New capital securities are unrelated to the (housing and urban) fund, so this is not intended to control jeonse loans."

Chairman Kim emphasized the protection of non-homeowners who are actual users and showed a more cautious stance on introducing DSR (Debt Service Ratio) regulations to jeonse loans. He explained, "Most jeonse loan borrowers are actual users and non-homeowners," and "Since the introduction of DSR for jeonse loans was discussed and then abandoned during the Moon Jae-in administration, a delicate approach is necessary."

Regarding the recent controversy over confusion surrounding Didimdol loans, he stated, "We share the recognition with the Ministry of Land that while we must keep promises to the public regarding policy loan products such as the newborn special loans, it is necessary to control the rate of increase."

Earlier, financial authorities strengthened regulations to manage the surge in household loans in August, and the growth rate somewhat slowed in September. However, with the Chuseok holiday in between and signs of loans increasing again in October, mainly in the secondary financial sector, the authorities appear to be increasingly concerned. Chairman Kim emphasized, "If additional measures related to loan regulations are necessary in the future, they will be implemented after sufficient explanation."

When asked whether the Financial Supervisory Service (FSS) Governor Lee Bok-hyun’s recent remarks about closely monitoring risks at financial holding companies such as Woori and KB Financial were pressure on management’s tenure, he drew a clear line. He said, "I believe the remarks made by Governor Lee at the FSS executive meeting mean nothing more than thoroughly checking the soundness risks of the two companies."

Meanwhile, Chairman Kim also disclosed follow-up measures on major issues raised at the recent National Assembly audit. Regarding the introduction of bank agency services to improve financial accessibility in depopulated areas, he stated, "We will first review the use of post offices and then consider specific measures such as revising the Banking Act or utilizing regulatory sandboxes."

The reduction of early repayment fees reflecting actual costs is also becoming visible. Chairman Kim explained, "According to simulations by commercial banks, the early repayment fee rate for mortgage loans could be reduced from the current 1.2%?1.4% to about half, around 0.6%?0.7%, and for unsecured loans, it could be lowered to around 0.4%. The implementation will start in January next year, but early implementation is possible for banks that are ready sooner."