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

Financial authorities plan to raise the share of mid-rate loans exempt from household lending caps, following their earlier decision to grant financial institutions up to 30 trillion won ($21.3 billion) in additional lending capacity. The move is intended to encourage banks to extend mid-rate credit more actively and ease financing difficulties for borrowers with genuine needs. Separately, regulators plan to create a new youth loan category to boost the supply of credit to younger borrowers.

The Financial Supervisory Service convened a working-level meeting with bank lending officials Wednesday afternoon to discuss follow-up measures to the Aug. 13 real estate package.

At the meeting, financial authorities told banks they would increase the share of mid-rate loans excluded from household lending volume calculations, according to sources in the banking industry. Currently, 30 percent of mid-rate loan disbursements count toward the household lending cap. Regulators said they plan to lower that threshold further after analyzing past lending data. If implemented, banks would have a stronger incentive to extend mid-rate loans than they do now.

Financial authorities also plan to introduce a new youth loan category to encourage banks to expand supply. As with mid-rate loans, a portion of loans extended to young borrowers who meet certain conditions would be excluded from the total lending cap.

The steps are part of the follow-up to the Aug. 13 measures. When announcing that package, financial authorities said the additional lending capacity of up to 30 trillion won would be directed toward "policy goals including promoting housing supply, stabilizing residential conditions for youth, and relieving financing difficulties for borrowers with genuine needs."

At Wednesday's meeting, regulators also urged banks to take extra care to prevent disruptions related to group loans. However, authorities said they plan to determine each bank's expanded lending quota through confidential bilateral negotiations — an approach they also used at the start of the year.

Regulators further asked banks to prevent "open-run" situations, referring to the recurring pattern of large numbers of mortgage applicants rushing to internet banks to secure home-backed loans.

In response, banks are expected to ease some of their self-imposed "channel regulations." Daily limits placed on loan brokers and mobile banking apps have drawn criticism for stoking anxiety among borrowers, and banks are now likely to allocate additional capacity through those channels.


hyuk@heraldcorp.com
rim@heraldcorp.com