South Korea's financial regulator will fully exempt privately issued mid-rate loans from the household lending caps applied to individual non-bank financial companies.
The Financial Supervisory Service (FSS) conveyed the plan on the 21st at a follow-up meeting on the government's Aug. 13 housing measures, held at its headquarters in Yeouido with representatives from the mutual finance, specialized credit finance and savings bank sectors, financial industry sources said.
Through the Aug. 13 package, financial authorities decided to expand the household-loan cap incentive for private mid-rate loans so that an additional 30 trillion won ($21.7 billion) in household lending can flow to owner-occupier buyers and low- and middle-income households. Savings banks currently receive an exemption on 80% of such loans from their caps when they handle private mid-rate lending. The authorities plan to raise the exemption rate for private mid-rate loans at non-bank lenders to 100%, aiming to encourage greater credit supply to borrowers with low and mid-tier credit scores.
Group loans handled by non-bank lenders will also be excluded from each firm's cap target. The authorities had earlier stated a policy of excluding group loans from the caps applied to all financial companies.
A separate allotment will be granted for general household lending. Korean Federation of Community Credit Cooperatives (MG Community Credit Cooperatives) and the National Credit Union Federation of Korea, both of which were given a household-loan target of zero for this year, are expected to receive a certain amount of quota. "We will decide how much to grant through consultations with individual financial companies," a financial authority official said.
