Financial institutions nationwide have restricted lending, such as negative account balances, after facing scrutiny over how growing stock market values are contributing to increased borrowing for investments. This follows calls from regulatory bodies for improved handling of personal debts.
KB Kookmin Bank announced on the 12th that beginning on the 16th, it will impose a cap of 50 million South Korean won on new overdraft accounts. When combined with other types of credit loans, the overall maximum limit for new borrowing will be set at 100 million South Korean won. Should a client establish a 50 million South Korean won ceiling for an overdraft account, they would then qualify for just 50 million South Korean won more in supplementary credit loans. This regulation will stay effective indefinitely. Nevertheless, different lending standards will be applied specifically to microloan financial services and government-backed programs. According to an official from KB Kookmin Bank, "The purpose of this rule is to maintain steady control over personal debts and focus resources on genuine borrowers," while also noting, "Assistance for those facing economic hardship will keep going uninterrupted."
Hana Bank has restricted new loan applications for high-earning individuals to a maximum of 100 million South Korean won beginning from the 12th. In the past, borrowing amounts above 100 million won was feasible depending on one’s earnings, but this limit will now be applied uniformly irrespective of income level.
Hana Bank will also decrease restrictions on specific inactive overdraft accounts. Although financial institutions usually reduce lending limits during yearly reviews when utilization is minimal, Hana Bank has chosen to remove previous exemptions granted to particular corporate clients. A representative from Hana Bank stated, "We will keep track of credit loan patterns and consider further actions if necessary."
Shinhan Bank stated on the 12th that it will launch a "preventive credit loan management strategy" beginning from the 15th. If the utilization ratio throughout the agreement term or within the three months prior to expiration falls under 10% for credit loans over 30 million South Korean won, the borrowing ceiling may be cut by as much as 20%. As an illustration, a line of credit with a negative balance amounting to 50 million South Korean won might decrease to 40 million South Korean won. Additionally, the bank plans to impose daily caps on online loan requests. Financial assistance programs aimed at those facing economic difficulties, including microfinance options and collaborative lending schemes, will continue to operate normally.
Woori Bank stopped processing non-in-person credit loan refinance requests from the 12th onward. It won’t take new credit loan applications via comparison services such as Toss, KakaoPay, Naver Pay, and Finda anymore. This comes after a sharp rise in loan inquiries through those channels, leading to measures for faster handling. Nonetheless, both new and renewed loans at branch locations and through WON Banking will still be available.
The NH Nonghyup Bank plans to lower favorable interest rates for personal loans by 0.1 percentage point from the 15th, which will result in higher effective rates. It has been reported that other commercial banks are examining comparable actions to limit lending activities. Additionally, financial institutions are exploring rewards such as eliminating charges for early loan settlements to motivate borrowers to pay off their debts sooner.
Bank actions come after the Financial Services Commission announced on the 11th to implement an emergency program for managing household debts due to increasing personal loans. As per the commission, total household lending within the finance industry rose by 9.3 trillion South Korean won last month — this represents a 2.7-fold rise compared to April's growth of 3.5 trillion won and much more than the 5.9 trillion won increase recorded in May of the previous year. This sharp increase has been linked to heightened interest in stock investments and growing real estate activity in the metropolitan area. The commission intends to conduct regular inspections of financial organizations that do not adhere to borrowing limits, stepping up their focus on controlling debt levels.