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Will regulators take aim at K bank's surging credit loans?

K bank CEO Lee Mun-hwan speaks during a press conference in Seoul on Aug. 4. The internet-only lender resumed its business in July after years of suffering capital erosion. Courtesy of K bank
K bank CEO Lee Mun-hwan speaks during a press conference in Seoul on Aug. 4. The internet-only lender resumed its business in July after years of suffering capital erosion. Courtesy of K bank

By Lee Min-hyung

With financial authorities poised to impose stricter loan regulations, K bank is in a growing sense of anxiety over whether the regulatory move will put a damper on its recent upward momentum.

The nation's first internet-only bank resumed its business as of July after years of suffering capital erosion. To prevent a recurrence of its nightmarish experience, the lender is aggressively launching new loan products to widen its customer base and compete with its key rival, Kakao Bank.

The lender has offered a competitive level of interest rates in its major apartment mortgage and credit loan products for the past two months since it resumed its loan business.

But the lender remains uneasy, as financial authorities' recent moves do not help the company extend the popularity in its major B2C loan products.

Regulators ― led by the Financial Supervisory Service (FSS) ― are expected to announce a set of regulations centering on disallowing banks from expanding credit loans to individuals. The decision came amid households' surging credit loans due to a stock investment boom nationwide.

The first target of the regulations will be on those who receive credit loans worth more than 100 million won, according to the FSS. The authority has yet to draw specific guidelines over the credit loan regulatory measure, but market insiders predicted the regulation on the loans would get tougher soon and end up scaling down lenders' loan business.

Aside from other major commercial lenders, K bank is on the close lookout for the authorities' gestures, as the bank's recent popularity may end up a temporary phenomenon without its major loan products.

The bank could become a major target of the regulator in consideration of its rapidly rising credit loan balance. As of the end of August, the figure for the lender came in at 1.78 trillion won, a surge of about 25 percent from a month ago. This is a steeper increase, compared with other major commercial lenders here ― such as KB and Shinhan ― during the same period.

For K bank, this was an inevitable marketing decision to attract attention from other banks' customers. But with the looming loan regulations, the lender will soon slow down the pace of its credit loan business expansion.

"Regulators will likely impose stricter-than-expected regulations on credit loans," an official from a major commercial bank here said. "The regulatory step will be imposed both on commercial and internet-only banks."

Some market critics also raise concerns over whether K bank will be able to maintain its worsening Bank for International Settlement (BIS) capital adequacy ratio. The figure refers to a minimum level of capital adequacy ratio that banks should attain, indicating their capital soundness.

As of the end of June, local banks' average BIS ratio reached 14.53 percent, and K bank reported the worst performance among the lenders at 10.2 percent.

"It is not proper to compare the ratio between K bank and commercial banks, as it has been only a few years since the notion of an internet-only bank has been introduced here," a K bank spokesman said.

"On top of that, major commercial lenders operate banking services for corporate clients and individual households, but this is not the case for internet-only banks which focus solely on B2C sectors."


K bank CEO Lee Mun-hwan speaks during a press conference in Seoul on Aug. 4. The internet-only lender resumed its business in July after years of suffering capital erosion. Courtesy of K bank
K bank CEO Lee Mun-hwan speaks during a press conference in Seoul on Aug. 4. The internet-only lender resumed its business in July after years of suffering capital erosion. Courtesy of K bank

By Lee Min-hyung

With financial authorities poised to impose stricter loan regulations, K bank is in a growing sense of anxiety over whether the regulatory move will put a damper on its recent upward momentum.

The nation's first internet-only bank resumed its business as of July after years of suffering capital erosion. To prevent a recurrence of its nightmarish experience, the lender is aggressively launching new loan products to widen its customer base and compete with its key rival, Kakao Bank.

The lender has offered a competitive level of interest rates in its major apartment mortgage and credit loan products for the past two months since it resumed its loan business.

But the lender remains uneasy, as financial authorities' recent moves do not help the company extend the popularity in its major B2C loan products.

Regulators ― led by the Financial Supervisory Service (FSS) ― are expected to announce a set of regulations centering on disallowing banks from expanding credit loans to individuals. The decision came amid households' surging credit loans due to a stock investment boom nationwide.

The first target of the regulations will be on those who receive credit loans worth more than 100 million won, according to the FSS. The authority has yet to draw specific guidelines over the credit loan regulatory measure, but market insiders predicted the regulation on the loans would get tougher soon and end up scaling down lenders' loan business.

Aside from other major commercial lenders, K bank is on the close lookout for the authorities' gestures, as the bank's recent popularity may end up a temporary phenomenon without its major loan products.

The bank could become a major target of the regulator in consideration of its rapidly rising credit loan balance. As of the end of August, the figure for the lender came in at 1.78 trillion won, a surge of about 25 percent from a month ago. This is a steeper increase, compared with other major commercial lenders here ― such as KB and Shinhan ― during the same period.

For K bank, this was an inevitable marketing decision to attract attention from other banks' customers. But with the looming loan regulations, the lender will soon slow down the pace of its credit loan business expansion.

"Regulators will likely impose stricter-than-expected regulations on credit loans," an official from a major commercial bank here said. "The regulatory step will be imposed both on commercial and internet-only banks."

Some market critics also raise concerns over whether K bank will be able to maintain its worsening Bank for International Settlement (BIS) capital adequacy ratio. The figure refers to a minimum level of capital adequacy ratio that banks should attain, indicating their capital soundness.

As of the end of June, local banks' average BIS ratio reached 14.53 percent, and K bank reported the worst performance among the lenders at 10.2 percent.

"It is not proper to compare the ratio between K bank and commercial banks, as it has been only a few years since the notion of an internet-only bank has been introduced here," a K bank spokesman said.

"On top of that, major commercial lenders operate banking services for corporate clients and individual households, but this is not the case for internet-only banks which focus solely on B2C sectors."


Lee Min-hyung mhlee@koreatimes.co.kr


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