South Korean banks are adjusting mid-rate loan supply speeds to meet second-half targets amid strengthened household loan quotas. An additional regulatory incentive that would exclude up to 80% of private mid-rate loans from quota calculations, mentioned by financial authorities in April, has not been implemented, leaving all mid-rate loan volumes counted toward quota limits. According to a financial industry official on July 23, all banks face quota pressure, and without the proposed incentive, mid-rate loan volumes remain constrained by total lending caps despite expansion goals.
Regulatory Incentive for Mid-Rate Loan Quota Exclusion Not Implemented
Financial authorities proposed an incentive in April's "Mid-Rate Loan Activation Plan" that would exclude up to 80% of private mid-rate loans from household loan quota calculations. A financial industry official stated on July 23 that no conclusion has been reached on this quota incentive, and all mid-rate loans continue to count toward total lending limits. The official noted that all banks face quota constraints, and without the proposed target framework, mid-rate loan volumes remain small.
KB Kookmin Bank Leads H1 Mid-Rate Loan Supply at 684.8 Billion Won
KB Kookmin Bank supplied 684.8 billion won in mid-rate loans during the first half, the largest amount among banks according to the Korea Federation of Banks. The bank plans to supply 1.53 trillion won in mid-rate loans for the full year, having completed approximately 45% of its annual target in H1. To achieve the remaining 55%, the bank plans to expand mid-rate loan supply in the second half.
Banks Launch New Mid-Rate Products Amid Quota Constraints
Hana Bank launched a 2 trillion won mid-rate loan product last month, offering a 5.5% fixed rate and up to 10 million won limit for customers in the bottom 50% of credit scores. Shinhan Bank operates "Shinhan Mid-Rate Loan" with rates up to 6.9% annually and plans to introduce "Super SOL Exclusive Mid-Rate Loan" on a mobile platform next month. Woori Financial Group plans to supply 1.1 trillion won in mid-rate loans across subsidiaries including card, capital, and savings bank units. NH Nonghyup Bank plans to launch a "First-Tier Financial Refinancing Loan" this year, linking customers with good repayment records at NH Savings Bank and Capital to bank loans. IBK Industrial Bank plans to release its own mid-rate loan product on the 31st, though the lending limit remains undecided as the bank has not received confirmation from financial authorities on quota exclusion amounts. IBK suspended new applications and originations for variable-rate mortgage loans at all branches nationwide from the 21st.
FSS Provides Separate Incentive for Mid-to-Low Credit Borrower Loans
Financial authorities provide incentives for a broader category of bank loans to mid-to-low credit borrowers that includes mid-rate loans. Based on last year's performance, a portion of this year's new originations is excluded from quota calculations. Mid-to-low credit borrower loans target borrowers with credit scores in the bottom 50% under Korea Credit Bureau (KCB) standards and have a broader scope than mid-rate loans, which include interest rate cap requirements. Financial authorities do not currently apply a specific quota exclusion ratio to banks, unlike second-tier financial institutions. The exclusion amount for each bank this year varies based on individual performance in mid-to-low credit borrower loans last year. A financial industry official stated that mid-rate loan volumes are typically higher in the second half, and banks plan to meet remaining targets based on demand conditions.
FAQ
What is the status of the proposed mid-rate loan quota incentive in South Korea?
The additional incentive proposed in April that would exclude up to 80% of private mid-rate loans from household loan quota calculations has not been implemented as of July 23. All mid-rate loan volumes continue to count toward banks' total lending limits.
How much did KB Kookmin Bank supply in mid-rate loans during the first half?
KB Kookmin Bank supplied 684.8 billion won in mid-rate loans during the first half, representing approximately 45% of its 1.53 trillion won annual target. The bank plans to expand supply in the second half to meet its full-year goal.
