Financial authorities announce revisions to specialized credit finance supervision rules

New 50% combined cap to cover real estate loans including project financing

Card companies required to assess payment gateway risks every quarter

Rental asset limits to be eased; revisions targeted for Q1 next year

The Financial Services Commission office at Government Complex Seoul in Jongno-gu [Yonhap]
The Financial Services Commission office at Government Complex Seoul in Jongno-gu [Yonhap]

Specialized credit finance companies will face new lending limits on real estate and construction loans. Under the proposed rules, loans to the real estate and construction sectors will each be capped at 30 percent of a firm's credit assets, while total real estate-related exposure — including project financing loans — will be limited to 50 percent.

The Financial Services Commission and the Financial Supervisory Service announced Friday that they are pre-notifying a revision to the Specialized Credit Finance Business Supervision Regulations. The move follows up on a real estate project financing soundness improvement plan announced in December last year.

Under current rules, specialized credit finance companies must keep combined project financing loans and debt guarantees within 30 percent of their credit assets. Unlike savings banks and mutual finance institutions, however, they have not been subject to separate sector-specific caps on real estate and construction lending.

To reduce concentration in real estate-related assets, financial authorities will introduce individual 30 percent caps on real estate and construction loans, each measured against credit assets. Alongside this, the combined total of project financing loans and real estate and construction loans will be capped at 50 percent of credit assets.

Oversight of online payments processed through credit card companies will also be tightened. Card companies will be required to assess the payment risk of payment gateway operators every quarter — not only when entering into or renewing contracts, but throughout the life of existing agreements.

The quarterly assessments will cover whether a payment gateway operator is registered as an electronic financial business, whether it complies with management guidance standards, its financial condition including equity capital, the status of external management of settlement funds, and any history of financial sanctions or involvement in illegal transactions. If a review uncovers problems, card companies must take appropriate action, including refusing to sign or renew contracts or terminating existing agreements early.

The rapid growth of payment gateway transactions processed through credit cards was cited as a key reason for the overhaul. The daily average value of credit card payments handled through payment gateway services rose from 744.5 billion won ($562 million) in 2021 to 968.4 billion won in 2023 and 1.17 trillion won last year.

An advertisement for card loans posted in Seoul [Yonhap]
An advertisement for card loans posted in Seoul [Yonhap]

Regulations on the rental asset business will be partially eased. Currently, a specialized credit finance company's average balance of total rental assets may not exceed its average balance of lease assets, and individual item categories are also subject to limits tied to the corresponding lease asset volume.

Going forward, the overall rental asset ceiling will be expanded to cover lease assets plus a set portion of installment financing assets, and per-item limits will be abolished. The restriction on entering the short-term rental market — centered on small and medium-sized operators — will be kept in place, however. Specialized credit finance companies will also be encouraged to pursue cooperative measures for small and mid-sized car rental firms, including expanded credit line loans, principal repayment deferrals, and referrals to business operators when short-term rental demand arises.

The draft revision will go through a pre-notification period running until Dec. 2. Financial authorities plan to complete the revision by the first quarter of next year, following review by the regulatory rationalization committee and a vote by the FSC.

Meanwhile, financial authorities reaffirmed their commitment to tightening oversight of lending overall — including household debt and in-house employee loans — at a comprehensive audit of the National Assembly's Political Affairs Committee on Thursday. FSC Chairman Lee Eok-won drew a clear line against easing household loan regulations, while Financial Supervisory Service Governor Lee Chan-jin said the agency is in talks with the FSC on applying the debt service ratio and loan-to-value ratio regulations to in-house employee loans.


rim@heraldcorp.com