Financial Services Commission evaluates competition in the financial sector loan market
Commercial banks’ share of personal credit loans has fallen in five years
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A study showed that the emergence of Internet-only banks (Inbank) has promoted competition in the banking sector in the personal credit loan market. Due to the interest rate competitiveness shown by Inbang, market concentration centered on commercial banks has eased. In addition, it was assessed that the level of competition among banks in the small and medium-sized business credit loan market was weak. There are also predictions that the voices calling for the emergence of a new In-Bang may be strengthened given that the consortiums challenging the ‘Fourth In-Bang’ are mainly promoting banks specializing in small and medium-sized businesses and small business owners.
The Financial Services Commission held the 3rd Financial Industry Competition Evaluation Committee on the 6th to report on the results of research conducted on the competitiveness evaluation of the small business loan and personal credit loan market and the status of financial supply by region from March 2019 to December of last year. revealed.
Loan-related competition indicators include the CR3 index, which shows market concentration (if the combined market share of the top three operators is more than 75%, a market dominant operator exists) and the CE index (Competition Efficiency, a competitive pressure indicator; the lower the index, the more competitive pressure in the market). high) was used. High competitive pressure means that competition is active.
When analyzing personal credit loans, it was found that there were no market dominant operators in banking, mutual finance, and other businesses (savings banks, women’s warriors, and loan businesses), and that overall competitiveness was good.
In particular, the CR3 index of the bank personal credit loan market fell from 51.2% in January 2019 to 43.4% in December last year. And analyzing the CE index from 2021 to 2023, competition in the banking personal credit loan market has increased.
The report analyzed that this was because Inbang, a new player, promoted competition by offering competitive interest rates and growing mainly in household credit loans. In addition, improvements in the disclosure of comparisons between bank deposit and loan interest rates in July 2022 and the introduction of online refinancing loan infrastructure in May of last year were also mentioned as reasons for increasing market competitiveness.
In addition, when examining the banks’ small business loan market, we found that there was generally no market dominant operator over the past five years. However, according to the CE index, from 2021 to the end of last year, competitive pressure on collateral loans among banks’ small and medium-sized business loans increased, while credit loans decreased.
The report stated, “Considering that loans backed by collateral and guarantees account for the majority of loans to small and medium-sized businesses, we need to explore ways to revitalize the fund intermediation function of banks, such as expanding credit loans.” This is interpreted to mean that policy support is needed because the small and medium-sized business credit loan market has the potential to become more competitive in the financial sector.
In addition, in non-metropolitan areas, the scale of financial supply from banks, savings banks, and mutual finance was found to be relatively insufficient compared to financial demand. Accordingly, it was suggested that measures to revitalize credit loans from banks should be considered in order to meet local financial demands.
The Financial Services Commission announced that it will refer to this evaluation and review whether there is anything to supplement the measures to revitalize competition mentioned in the ‘banking management, sales practices, and system improvement plan’ discussed last year.
We will review whether there are any additional supplements related to the promotion of policies to revitalize competition, and will continue to accumulate data to evaluate competition by function like this time and analyze the structure of the overall deposit and loan market to provide deposit and loan deposits and deposits for local banks, savings banks, mutual finance, and women’s companies. It is planned to be used to prepare approval policies and role establishment plans for loan handling institutions.
