Top 5 banks launch voluntary lending controls as regulators warn of stricter rules in July
South Korean banks are expected to target a net reduction in household loan balances in June after a surge in credit lending — driven by debt-funded investment demand — sent household borrowing soaring in May. Financial regulators have warned that if June management falls short, stricter rules will take effect in July.
At a household debt review meeting on Friday, financial authorities sharply criticized banks for failing to keep lending in check, sources in the financial sector said Monday. Regulators also set a policy of summoning lenders that miss their management targets for weekly reviews. Authorities particularly stressed that if the upward trend in household debt does not ease by the end of June, stronger regulations could be introduced in July. There is also speculation that a real estate tax reform plan the government is working to announce next month could include additional lending restrictions, such as limits on jeonse loans for non-resident homeowners.
"They emphasized that if loan management does not improve this month, regulations could be tightened further next month," a senior official at one of the banks who attended the meeting said. "We understood it as a call to do our part in curbing the overheating of household lending through June."
A senior official at another commercial bank said, "Given the strong directive from the authorities, the banking sector could also draw up its own voluntary lending restriction guidelines." The official added, "The loan allowances originally given to banks were not large to begin with, so if there is the will, they can be reduced."
Banks are now expected to aggressively tighten lending with the goal of bringing June loan balances below May levels. Additional measures beyond those already announced — including raising add-on interest rates and cutting preferential rate benefits — are also anticipated.
Shinhan Bank said it would restrict credit loan applications through non-face-to-face channels starting Monday when combined daily applications — both in-person and online — exceed its internal management threshold. For revolving credit lines with a utilization rate below 10% in the three months before maturity, the bank will cut the credit limit by up to 20% upon renewal. NongHyup Bank said it would trim preferential rates on credit loans by 0.1 percentage point and on mortgage loans by 0.2 percentage point.
KB Kookmin Bank will cap credit loans and revolving credit lines at 100 million won (about $65,800) and 50 million won, respectively, starting Tuesday. Hana Bank capped credit loan limits at 100 million won starting Friday.
The moves come in response to a sharp rise in household lending in the second quarter, fueled by debt-funded investment in credit products. Total household loans across all financial institutions rose 9.3 trillion won from the previous month as of the end of May — the largest monthly increase since August 2024, when the figure reached 9.7 trillion won.
The combined household loan balance at the country's five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 773.6099 trillion won as of Thursday, up 5.9319 trillion won from the end of last year. In just 10 days from the end of May, the balance rose 2.7870 trillion won, of which credit loans accounted for 1.6226 trillion won.
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