[Q&A] Kim Byunghwan: "March Household Loan Growth Significantly Decreased, April Needs Monitoring"

Kim Byung-hwan: "Household Loan Growth in March Not Significant"
"Challenging to Manage Loan Growth While Interest Rates Are Falling"

Kim Byung-hwan, Chairman of the Financial Services Commission, is attending the regular press briefing held at the Government Seoul Office in Jongno, Seoul on the 26th, answering questions from the press. 2025.3.26 Photo by Jo Yong-jun

Kim Byung-hwan, Chairman of the Financial Services Commission, stated that the increase in household loans in March significantly decreased compared to the previous month. Regarding criticism that the government's household loan policies have been inconsistent and confusing recently, he explained, "This is happening in the process of achieving two goals to curb household loan growth during a period when the base interest rate is declining."

Chairman Kim held a press briefing at the Government Complex Seoul on the morning of the 26th and said, "As of March 20, the increase in household loans has significantly decreased compared to the previous month. However, there is a possibility of an increase again next month, so we are monitoring the situation without lowering our guard."

He added, "I understand there have been criticisms that the financial authorities' responses to household loans have been confusing and inconsistent recently, and I think there is some validity to those points. However, this is happening in the process of achieving two goals: managing macroprudential stability and keeping household debt at an appropriate level while interest rates are falling. Ultimately, to achieve these two goals, variables will be controlled through bank screenings," he explained.

Below is a Q&A session with Chairman Kim.

- Please share your specific stance on the amendment to the Commercial Act.

▲ As the Chairman responsible for the advancement and value-up of the capital market, I fundamentally feel a strong will and necessity for governance aspects, emphasizing the protection and prioritization of general shareholders. However, the current amendment to the Commercial Act raises concerns about side effects. As an alternative, we have suggested prioritizing amendments to the Capital Markets Act. We have also expressed the hope that sufficient discussions take place considering various alternatives alongside the Capital Markets Act. Our stance remains the same. Regarding whether to exercise veto power on the amendment to the Commercial Act, since the Ministry of Justice is the primary authority and opinions from various related institutions will be heard, the Acting President will make the final decision. Therefore, I believe it is inappropriate to publicly comment on this matter.

- What is the current situation regarding household loans in March?

▲ The household loan growth rate was negative in January but increased somewhat in February. However, the February figures did not deviate significantly from our management targets. I have reviewed the numbers up to around March 20, and the increase has noticeably decreased compared to February. The issue is that after signing a house contract, it usually takes about one month, sometimes up to two months, for loan approval. Therefore, we are monitoring the situation closely without losing vigilance. Since this is somewhat concentrated in areas like Seoul, as I mentioned previously, we are coordinating with banks to enable proactive regional monitoring.

- Last year, household loans decreased in the third quarter after rising in the second quarter, peaking in August. You mentioned the second quarter trend is more important. If household loans increase beyond expected ranges, is the Financial Services Commission considering additional regulations?

▲ Household loans surged significantly in the second quarter of last year, peaking around July and August. This year, we plan to manage the situation monthly and quarterly rather than only at year-end. If there is some increase in the second quarter, we will manage the situation by distributing the annual plan accordingly. If loans increase substantially, we have all possible measures on the table and will take appropriate actions based on the situation.

- Regarding the 88.2 billion KRW improper loan at IBK, the Financial Supervisory Service (FSS) reports that the bank attempted to conceal it. Given repeated incidents, are there new measures for internal bank controls?

▲ I consider the IBK case very serious. Similar incidents have occurred at commercial banks and even at so-called policy financial institutions. We have a very serious awareness of this. I understand that investigations and necessary sanctions are underway based on inspection results, and we must respond strictly. There are some common features in past incidents, such as improper or illegal loans related to relatives and retirees. We have implemented a responsibility structure, but since it is still in the settling phase, we need to review it again. More specifically, we should focus on managing loans related to relatives and retirees more intensively. There should be internal control measures for this. Whether this will be handled by supervisory authorities or banks themselves will be discussed with banks and the FSS during inspections, and we will seek solutions.

- You mentioned equity-type mortgages today. The Ministry of Land, Infrastructure and Transport has previously introduced profit-sharing mortgages that share losses and gains. How does this differ, what are the pros and cons, and when might it be launched?

▲ Rather than providing specific details now, I can say that similar concepts have been tried in the past with limited effectiveness. We are currently reviewing and discussing what constraints affected their operation. Once this is clarified, I will explain in more detail on another occasion.

- What is the Financial Services Commission's basic view on MG Insurance?

▲ Our basic stance is to handle MG Insurance according to laws and principles. The principles are establishing a sound market order, protecting insurance policyholders, and ensuring financial market stability. However, options are very limited. Among these options, we are carefully examining which is the most desirable and feasible solution. We plan to announce our handling plan within a reasonable time.

- Financial Supervisory Service Governor Lee Bok-hyun criticized MBK's Homeplus bailout plan as essentially a lie on the radio today. What is your opinion?

▲ Investigations are ongoing regarding Homeplus, MBK, and related parties such as Shin Young Securities, which sold bonds. We will take appropriate measures based on findings. The same applies to unfair trade. Past cases show that investigations take considerable time to yield results. Since a corporate rehabilitation plan must be prepared by early June for creditors, we need to see if we can accelerate the process somewhat. I assure you this is a matter of significant social interest with many victims, so we will conduct strict and prompt investigations and take corresponding actions.

- Yesterday, the Financial Services Commission met with bank officials to review household loan trends. What was discussed? How do you respond to criticism that household debt policies are inconsistent?

▲ We regularly conduct such reviews. Recently, after announcing real estate measures, we checked the situation banks are experiencing on the ground and their planned responses. Regarding criticisms that financial authorities' responses to household loans have been confusing and inconsistent, I acknowledge there is some validity. The criticisms mainly focus on two points: first, questioning whether it is appropriate to say interest rates should be lowered while also urging household loans to decrease; second, criticism of tightening regulations at the end of last year, loosening them early this year, and then tightening again.

The first point is valid if we have only one control variable or objective function. However, we are currently managing two objectives: controlling household debt growth at an appropriate level for macroprudential stability and managing the widening gap between loan interest rates and the base rate during a rate cut. We have two objective functions to achieve in a declining base rate environment. The method to achieve this is through screening. Banks can individually reduce loan limits or filter speculative real estate demand to prioritize those who genuinely need loans. Since last year, we have asked banks to control through screening. Some banks have tightened restrictions on multi-homeowners and gap investments, while others have been more lenient. This policy combination is inevitable to manage household debt growth during a rate cut period, and we ask for understanding.

The second point concerns inconsistency. We have three principles for household debt: keep the growth rate within the nominal growth rate, currently 3.8%; ensure borrowers only borrow within their repayment capacity (DSR); and allow banks to manage specific situations autonomously. The first two principles remain firm. When some suggested easing due to weak local real estate markets, I emphasized the importance of maintaining these principles firmly.

The third principle allows banks autonomy. Loan demand fluctuates, and banks may differ in how they prioritize or filter loans. While consistency is preferable, some fluctuation is inevitable. If this is called inconsistency, we must accept it. We regret any inconvenience to borrowers, but this is a mechanism operating under the current system. The government does not uniformly prohibit loans to multi-homeowners or gap investments. As I said last year, issuing such guidelines would mean no loans at any bank, so we leave it to banks to manage household loans autonomously based on their situations.

- What is the progress on Woori Financial Group's insurance company acquisition?

▲ We have likely received ratings and review opinions from the Financial Supervisory Service, and the Financial Services Commission will conduct reviews according to established procedures. It is difficult to predict the schedule. We prioritize thorough and fair reviews over timing, so the timeline is uncertain, but we will conduct focused reviews. The law and regulations require a financial soundness rating of at least grade 2. If not met, we will check whether requirements such as disposal of non-performing assets or capital augmentation can be fulfilled. We will carefully examine factors causing a grade 3 rating and whether the company can meet requirements through measures, then make a conclusion accordingly.