ATMs from major banks are clustered inside a building in Seoul. [Newsis]
ATMs from major banks are clustered inside a building in Seoul. [Newsis]

Financial authorities plan to allocate additional loan quotas to the five major banks as a follow-up to the Aug. 13 real estate measures. Banks that have kept household loan growth within regulator-set targets will receive larger quota allocations as an incentive for responsible management.

According to financial industry sources Tuesday, the Financial Supervisory Service will convene a meeting of loan officers from commercial banks and other financial institutions Wednesday to discuss the additional distribution of household loan quotas. The gathering is part of the follow-up to the Aug. 13 real estate package announced last week.

Through the Aug. 13 measures, financial authorities raised the target growth rate for household loans across the entire financial sector this year from 1.5 percent to 3.0 percent. The expanded capacity is expected to add roughly 30 trillion won in additional lending room across the sector. The five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — currently operate under a combined loan growth target of 4.34 trillion won for this year. The final revised figure is expected to be set Wednesday.

Wednesday's meeting will focus on establishing specific criteria for distributing the expanded lending capacity among individual banks.

Rather than applying a uniform increase to all financial institutions, authorities have settled on a framework that rewards those that managed their household loan volumes responsibly in the first half of this year.

Among the five major banks, KB Kookmin Bank and Shinhan Bank are understood to have stayed within their total loan targets through recent months. Under the authorities' proposed criteria, those two banks would receive larger quota allocations than their peers.

Most of the expanded capacity is expected to be directed toward policy-driven purposes — including balance-payment and relocation loans for group housing projects, housing stability for young people, and relief for end-users facing financing difficulties. Authorities are also considering setting category-specific sub-limits to prevent unintended growth in unsecured credit and other loan types.

As overall loan quotas expand, discussions are also expected to address the voluntary restrictions that individual banks have imposed on themselves. To stay within their targets, the five major banks have recently limited access to mortgage credit insurance and suspended variable-rate home mortgage products, which carry relatively lower interest rates. KB Kookmin Bank also cut its home mortgage limit from 600 million won to 300 million won.

However, given that authorities have signaled their intention to maintain strict oversight of household lending, self-imposed restrictions on unsecured credit are likely to remain in place.

The quota expansion is expected to ease some of the difficulties faced by end-users who have been unable to secure balance-payment loans — including buyers at Paellusid near Maegyo Station in Suwon and the DH Bangbae development in Seocho-gu, Seoul. The financial industry estimates that balance-payment loan demand in the second half of this year will reach approximately 70,000 households, representing 26 trillion won.


hyuk@heraldcorp.com
rim@heraldcorp.com