Banks Tighten Credit Loans Amid Warnings Over 'Debt-Financed Investing'

The banking sector is tightening credit loans in response to a surge in "debt-financed investing"—borrowing money to invest in the stock market—fueled by the recent stock market rally.

Banks are racing to implement countermeasures following concerns from financial authorities that excessive leveraged investing could increase stock market volatility and heighten financial risks for individual investors.

According to the financial sector on June 12, Hana Bank is restricting credit loan limits for high-income earners starting today.

The bank has decided to cap the maximum credit loan amount for individuals at 100 million won, regardless of the borrower's annual income, when applying for a new loan.

It is also strengthening reductions in unused credit limits when renewing overdraft accounts.

While Hana Bank previously reduced limits on unused accounts upon maturity, it had allowed some exceptions depending on the product type.

The bank plans to eliminate these exceptions and strictly enforce limit reductions according to its regulations.

"We plan to monitor credit loan trends and consider further measures if necessary," a Hana Bank official stated.

Shinhan Bank also announced today that it will implement "preemptive credit loan management measures" starting June 15.

Shinhan Bank has decided to restrict non-face-to-face credit loan applications if the daily total of face-to-face and non-face-to-face loan applications exceeds internal management thresholds.

Products designed to support financially vulnerable groups, such as microfinance loans and mutual growth refinancing loans, will be excluded from these application restrictions.

In addition, for household credit loans exceeding 30 million won, including overdraft accounts, the bank will reduce limits by up to 20% upon maturity renewal for accounts with a usage rate of less than 10% over the three months prior to maturity.

"We have prepared these preemptive operational measures to stably manage household loans amid the recent expansion in credit loan growth," Shinhan Bank explained.

NongHyup Bank will reduce preferential interest rates applied to mortgage loans and credit loans by 0.2 percentage points (p) and 0.1 percentage points (p), respectively, starting June 15.

As a result, the lower bound of loan interest rates is expected to rise.

Previously, Woori Bank also announced yesterday that it would suspend applications for non-face-to-face credit loan refinancing products and block all credit loan applications coming through loan comparison platforms such as Kakao Pay, Naver Pay, Finda, and Toss.

These measures are based on discussions between the Financial Services Commission (FSC) and commercial banks regarding the rise in credit loans, and other commercial banks are reportedly considering the introduction of self-regulatory measures for credit loans.

The FSC previously stated at a joint household debt inspection meeting with related agencies that it would activate an emergency management system as household loans, centered on credit loans, continue to expand, and that it would intensively inspect financial companies that fail to meet their targets on a weekly basis.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.