Financial Authorities to Fully Exclude Collective and Medium-Interest Rate Loans from Secondary Financial Institutions in Household Loan Growth Limits

Collective Loans Excluded from Household Loan Growth Calculations
Medium-Interest Loan Exclusion Rate Raised from Maximum 80% to 100%

Financial authorities have decided not to include the collective loans and net increases in medium-interest rate loans from secondary financial institutions, such as mutual finance companies, savings banks, and specialized credit finance companies, in this year's household loan growth limit management.

According to the Financial Supervisory Service on August 21, officials from associations of secondary financial institutions were summoned on this day and informed of this policy.

As a result, collective loans handled by secondary financial institutions from this month will be excluded from the household loan growth limit management scope.

Previously, stricter household loan regulations had reduced the lending capacity of banks and other financial institutions, which led to disruptions in the supply of interim and balance loans for newly built apartments scheduled for move-in, including relocation loans. In response, on August 13, financial authorities doubled the household loan growth target for this year—from the initially planned 1.5% year-on-year increase to 3.0%.

A Financial Supervisory Service official explained, "Last year, as the bank sector's household lending was restricted, collective loans in the secondary financial sector, particularly mutual finance institutions, increased during the first half of this year." He added, "However, with the recent measures giving banks more lending capacity, we do not expect loan demand to shift drastically to secondary financial institutions."

Financial authorities will also expand the total volume management incentives for medium-interest rate loans. Going forward, the entire net increase in medium-interest rate loans will be excluded from the household loan growth limit management.

Currently, when specialized credit finance companies provide medium-interest rate loans to borrowers in the bottom 50% credit tier, 40% of the loan amount and, in the case of savings banks, 80% of the loan amount are excluded from the total when calculating household loan performance. In the future, both rates will be expanded to 100%, so the entire loan amount will be excluded from household loan growth calculations.

This substantial expansion of incentives by the financial authorities aims to prevent a contraction in loan supply to mid- to low-credit borrowers due to the household loan growth restrictions.

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