Stop Debt-Driven Investing: Tightening Loans Across the Board, Including Card Loans

[Financial News] As a stock market rally fuels demand for debt-financed investing using credit loans, the financial authorities have begun cracking down on card loans. Following the banking sector, card issuers and other second-tier lenders are also tightening controls, and the entire financial sector is working to curb the rise in household debt.
According to the financial sector on the 15th, the Financial Supervisory Service (FSS) recently urged six card companies, including Samsung Card, KB Kookmin Card, Hyundai Card, Lotte Card, NH Nonghyup Card and BC Card, to strengthen household debt management. It was also reported that the FSS asked companies with high card loan growth to comply with lending limits and improve risk management.
The recent increase in credit lending appears to have prompted pressure across the board, extending beyond bank loans to card loans and other second-tier lending. An FSS official said, "We are monitoring card loan growth and other developments on a regular basis," adding, "We stressed to card companies that meeting this year's household debt management targets is the top priority."
According to the Financial Services Commission (FSC), household lending across the financial sector rose by 9.3 trillion won last month, marking an increase of more than 9 trillion won in just one month. Other loans, which include credit loans and overdraft accounts, led the growth with a 3.7 trillion won increase in May.
In response, some card companies have stepped up management by suspending new household credit loan offerings through loan-comparison platforms. KB Kookmin Card decided to stop displaying its household credit loan products on loan-comparison platforms, including Naver Pay, Kakao Pay, Toss, Banksalad and Finda, for one week. The move is intended to block new customer inflows by preventing KB Kookmin Card loan products from appearing on those platforms.
An industry official said, "It is true that demand for card loans has increased as debt-financed investing has grown amid the stock market rally," adding, "We are strengthening risk management, including compliance with total lending cap guidelines, in line with the authorities' request."
Banks are also joining the lending squeeze, creating an atmosphere in which the entire financial sector is making every effort to prevent overheating in lending. Starting on the 15th, Shinhan Bank will restrict applications for non-face-to-face credit loans if the combined daily number of in-person and non-face-to-face credit loan applications exceeds its internal management threshold. For overdraft accounts with a utilization rate below 10% based on the three months before maturity, the bank will cut the limit by up to 20% when extending maturity. Nonghyup Bank also decided to reduce preferential interest rates for mortgage loans and credit loans by 0.2 percentage points and 0.1 percentage points, respectively, starting on the 15th.
KB Kookmin Bank will cap the maximum limit for credit loans and overdraft accounts at 100 million won and 50 million won, respectively, from the 16th. Hana Bank also capped its credit loan limit at 100 million won starting on the 12th.

zoom@fnnews.com Lee Jumi Reporter