In October, the authorities seem to take out the card of ‘strengthening DSR’ due to an increase of 2 trillion in new household loans from 2nd financial institutions. 92% of new household loans for female warriors in the first half of the year were DSR exception… The effectiveness of regulation is questionable. Countermeasures against second financial ‘balloon effect’ expected to be announced at the household debt review meeting on the 11th.
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▲ ⓒKim Jae-seop, People Power Party lawmaker’s office
As household loans from second-tier financial institutions increased by 2 trillion won in the month of October, and the ‘balloon effect’ of household loans was clearly revealed, the financial authorities are expected to take out the card of strengthening DSR (Debt Service Ratio) regulations. However, since a significant portion of new household loans from second-tier financial institutions in the first half of this year are exempt from the application of DSR regulations, questions are being raised about whether the fire will be extinguished in a hurry.
According to the office of People Power Party lawmaker Kim Jae-seop, a member of the National Assembly’s Political Affairs Committee, on the 4th, the rate of new loans not subject to DSR regulations in the first half of this year reached 92.1% in the credit specialty business.
The savings banking industry (86.9%), the insurance industry (76.5%), and the mutual finance industry (68.2%) also showed high rates. During the same period, the rate of new loans not subject to DSR regulations at commercial banks was 63.3%.
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▲ ⓒKim Jae-seop, People Power Party lawmaker’s office
Second-tier financial institutions handle a large amount of △policy mortgages, △intermediate payment loans, and △moving cost loans that are not subject to DSR regulations. The balance of these loan products accounts for 28.2% of financial sector loans in the first half of the year. The amount is 53 trillion won.
In addition, △ microfinance products △ policy fund loans △ deposit loans △ loans of 3 million won or less △ debt rescheduling loans △ loans for inevitable debt acquisition △ deposit collateral loans △ installments, leases, and short-term card loans are loans except for DSR application.
In particular, low-income financial products, small loans under 3 million won, and short-term card loans are loans mainly handled by savings banks and credit card companies.
Previously, the financial authorities monitored the increase in household loans and continuously reviewed the stress DSR measures of second-tier financial institutions, which are more lenient than those of the banking sector. Currently, the DSR for individual borrowers in second-tier financial institutions is 50%, which is lower than the 40% in banking institutions.
Accordingly, the authorities are considering lowering the average DSR for each company to 45%.
In addition, it is expected that the stress interest rate increase that was implemented for housing mortgage loans in the metropolitan area by banks last September will also be implemented in second-tier financial institutions.
As the stress interest rate rises, the borrower’s loan limit decreases. There is a likely plan to increase the stress interest rate for secondary financial institutions, which is currently 0.75%p, to 1.2%p.
An official from the financial sector said, “The DSR regulation has been very effective in tightening bank loans, but second-financial small-scale and low-income loans are not subject to regulation, so the effectiveness of the policy is questionable,” and added, “Resolving the cause of the increase in recession-type emergency loans is an urgent priority.”
The Financial Services Commission plans to hold a household debt review meeting on the 11th and present directions for strengthening the management of the rapid increase in household loans in second-tier financial institutions.
