A loan counter at a bank branch in Seoul [Herald DB]
A loan counter at a bank branch in Seoul [Herald DB]

Major commercial banks are leaning toward keeping per-borrower mortgage limits in place even as the government's Aug. 13 real estate package adds up to 30 trillion won in aggregate lending capacity to the financial sector. With demand concentrated in group loans and other owner-occupier financing, banks have concluded that easing individual caps prematurely could exhaust the additional headroom too quickly — and say their priority is distributing loans to as many borrowers as possible. As a result, the actual loan ceiling available to individual borrowers is not expected to change significantly.

KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH NongHyup Bank — the country's five largest lenders — are in talks with financial regulators on how to implement follow-up measures under the Aug. 13 package, according to financial industry sources Wednesday. The Financial Supervisory Service plans to convene a closed-door meeting with lending officers from banks and other financial institutions to discuss how to allocate the additional loan quotas.

Under the Aug. 13 measures, financial authorities announced they would raise the household loan growth target for the entire financial sector this year from 1.5 percent to 3.0 percent. The move is expected to expand the sector's lending capacity by around 30 trillion won compared with the previous limit.

The five major banks are also expected to gain additional lending room under the package. Their combined loan growth target for this year stands at 4.34 trillion won, and industry insiders expect that figure to roughly double.

Even after receiving the additional quota from regulators, the banks have largely decided to maintain per-borrower restrictions — such as limits on mortgage credit insurance (MCI and MCG) enrollment — for standard home-backed loans outside of group loans. The reasoning is that once group loan demand is absorbed, the remaining usable capacity will be limited, and loosening individual caps on top of that could drain the available headroom rapidly.

Since household loan balances began rising sharply in April, banks have responded with in-house rules tightening per-borrower limits. For home-backed loans, the most prominent measure has been restricting access to mortgage insurance — borrowers who cannot enroll in such insurance face a lower loan ceiling.

KB Kookmin Bank introduced a particularly strict measure in July, cutting the limit on standard home-backed loans — excluding group loans — from 600 million won to 300 million won. That cap is widely expected to remain in place for now.

Banks are also expected to process group loans based on the pre-sale price, which is generally lower, rather than the appraised value. Shinhan Bank is already accepting preliminary consultations for balance-payment loans at the DIH Bangbae development on a pre-sale price basis.

"We have set an internal policy of distributing loans as evenly as possible to as many borrowers as we can," said a senior lending executive at one commercial bank. "We are also reviewing whether to keep limit-related measures such as mortgage insurance restrictions at their current level." An official at another commercial bank said the expanded quota would still fall short of meeting current market demand. "We need to prioritize group loans and loans targeting young borrowers, so it will be difficult for the benefits to reach other borrowers broadly," the official said.

Channel-level restrictions, however, may be partially normalized. Banks currently cap the volume of home-backed loans that individual loan agents and branch offices can handle, as a way of suppressing mortgage demand.

Self-imposed caps on unsecured credit loans are also very likely to remain unchanged. Banks currently limit credit loan ceilings to 100 million won regardless of annual income, and reduce unused credit lines on revolving accounts when they come up for renewal.

This approach aligns with the direction financial authorities have signaled. "The message behind this real estate package is not about expanding banks' sales capacity," a financial authority official said. "The quota was raised to channel lending toward policy-driven purposes — mainly youth borrowers and genuine owner-occupiers."

Financial authorities also plan to allocate additional lending quotas to the secondary financial sector. The extra headroom, however, is expected to be concentrated in products with a strong policy rationale, such as group loans and mid-rate loans. As a result, mutual finance cooperatives and some savings banks may see their lending quotas increase.

Credit-focused lenders such as card companies and capital firms, by contrast, are unlikely to see much change from the additional quota allocation.

"For the secondary financial sector as well, we will distribute quotas in a way that rewards institutions that managed their aggregate lending responsibly in the first half of the year — the same approach as with the banking sector," the financial authority official said.


hyuk@heraldcorp.com