FSS gives banks more flexibility on household loan policies

Lee Bok-hyun, Governor of the Financial Supervisory Service, speaks at a meeting with bank CEOs in Seoul on the 10th. [Photo by Kim Ho-Young]

The head of South Korea’s financial watchdog gave local commercial lenders greater discretion to deal with their mortgage loans on Tuesday amid a recent pick-up in household debt, signaling a shift from his earlier emphasis on the need to curb the loan rise strictly.

The shift will likely allow local banks to take a more flexible approach to household lending policies.

At Tuesday’s meeting with the heads of 18 commercial lenders, Financial Supervisory Service (FSS) Governor Lee Bok-hyun stated, “It is time for Korean banks to make adjustments to loan portfolios, such as tightening screening processes for high-risk loans.” He added that as the financial regulator’s guidelines for household loans serve as the threshold, banks should voluntarily strengthen their own risk management practices, while apologizing for causing confusion in the market and among consumers with his previous strong remarks on the loan surge.