Less than a month after financial authorities increased the total household loan cap for the banking sector, the five major banks have effectively exhausted their newly allocated lending capacity. As the additional lending capacity of approximately 2.8 trillion Korean won, secured through discussions with authorities, was rapidly depleted, forecasts suggest that the banking sector’s loan requirements will be difficult to lower easily until the end of the year.
According to the financial sector on the 22nd, the outstanding household loans (excluding policy loans) of the five major banks—KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup—as of the 17th stood at 652.2617 trillion Korean won. This marks an increase of 7.2917 trillion Korean won from the end of last year (644.97 trillion Korean won). The banks have already exceeded the annual growth target of approximately 7.11 trillion Korean won, newly set with financial authorities at the end of last month, by nearly 200 billion Korean won.
By bank, two of the five major banks have significantly exceeded their annual targets for this year, while two others are barely maintaining levels close to their targets.
However, the total outstanding household loans of the five major banks, including policy loans, stood at 781.5082 trillion Korean won as of the 17th, a decrease of 611 billion Korean won from the end of August (782.1192 trillion Korean won). This marks the first decline in total household loan balances in six months since the 136.4 billion Korean won decrease observed in March.
The reduction in the total household loans of the five major banks is attributed to the continued asset securitization of Bogeumjari Loans handled by the banks this month, leading to a decrease in mortgage loan balances. Once a certain volume of Bogeumjari Loans handled by the banks accumulates, they are transferred to the Korea Housing Finance Corporation and removed from the banks’ books.
Prospects are divided on whether the self-imposed loan regulations by the banking sector will be eased within the year, as the banks’ own household loans continue to grow. Given that financial authorities have already increased the total household loan cap once, observers note that banks will need to meet the new targets by year-end, making it difficult to further lower loan requirements.
However, there are also forecasts that loan requirements will not rise further, as certain group loans such as moving cost, interim payment, and final payment loans are excluded from total volume management, and seasonal declines in demand for new mortgage loans are expected toward the end of the year. Since the current loan balances exceeding the targets include some group loans, there may be no significant disruption in loan supply for actual demanders.
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