Card, capital firms get modest household loan quota boost; mid-rate lending seen rising

Financial regulators have allocated additional household loan quota targets to credit card companies and capital firms, though the modest size of the increases and their selective distribution mean card lending is unlikely to rise significantly.

According to financial industry sources, the Financial Supervisory Service began notifying individual credit finance companies of new household loan quota targets on Wednesday and was expected to complete the process that day. The move is part of a broader effort to reset company-level lending limits after authorities raised this year's overall household debt growth ceiling from 1.5 percent to 3 percent.

The additional allocation is estimated at around 0.5 percent of each company's outstanding household loan balance at the end of last year — roughly in line with what mutual finance institutions such as saemaul credit unions and credit cooperatives, as well as savings banks, received on Tuesday. The outcome confirms earlier expectations that non-bank lenders would receive more limited quota increases than commercial banks.

Regulators plan to distribute the additional quotas selectively based on whether companies have complied with existing targets. "We need to encourage compliance with targets, so we intend to be selective in how we allocate," a financial authority official said. "We will take care to ensure that companies that have adhered to their targets are not penalized." Fewer than half of the companies in the credit finance sector are understood to have received new targets.

The additional allocation does not signal a relaxation of supervisory policy, however. At a meeting with credit finance firms on Aug. 28, the FSS is understood to have stressed that overall household loan management will remain strictly in place, as the additional quota is focused on housing finance and lending to young borrowers and those with genuine demand.

Industry players are paying closer attention to incentives tied to mid-rate loans than to the quota increase itself. Since last month, regulators have excluded 100 percent of growth in mid-rate lending from each company's household loan quota, allowing firms to expand mid-rate products targeting borrowers with low-to-mid credit scores as a way to create more lending room.

"Given that the financial authorities have raised the mid-rate loan exemption rate for card companies from 40 percent to 100 percent, individual card companies will likely be reviewing plans to expand their mid-rate loan offerings," an official at one card company said.