Lending controls invite resistance from banks

Credit card firms also voice discontent with regulatory policies


Uneasiness and skepticism over the financial regulators’ policy to curb household loans are growing in the banking sector and among think tanks.

While the Financial Services Commission plans to unveil additional measures to curb household loans, more and more bankers are citing the possibility of an aggravated interest burden on the public.

The FSC has reportedly been inducing banks to raise lending rates, a banker said, adding, “Many individuals and small- and mid-sized enterprises will have to suffer a growing burden.”

According to industry sources, Korea Federation of Banks chairman Shin Dong-kyu and chairmen of major financial groups are taking the initiative in resisting the regulatory policies.

Shin has said the regulatory guidelines to curb loan growth rate “cannot be the eternal truth.” Financial group chiefs also reportedly instructed banking units to conduct household lending business flexibly.

Citigroup predicted that the policy would invite growth in household lending in the secondary banking sector.

Economists at major think tanks have also issued feasible risks from the tough regulatory action.

“The policy to curb loan growth rate cannot always be applicable to the market,” said an economist at Samsung Economic Research Institute.

He said the financial authorities should take the short-term impact on the economy into consideration.

Following the measures, which were unveiled in late June, the authorities are set to announce another round of policies to curb the lending.

“We are considering taking additional measures,” FSC Vice Chairman Shin Je-yoon told reporters Tuesday.

Aside from commercial banks, credit card companies ― particularly players who joined the saturated market later than major companies ― have been discontented with recent regulatory policies.

The “3-percent rule” recently set by regulators is haunting the credit card industry. The rule bans companies from posting a growth rate of more than 3 percent in the issuance of cards per annum.

Most companies recorded more than 10 percent in their annual growth rate during the first half of 2011 from the same period last year.

Lotte Card topped the list with the rate of 16.8 percent, followed by Hana-SK Card with 13.8 percent, KB Kookmin Card with 12 percent, Samsung Card with 11.7 percent and Hyundai Card with 11.4 percent.

Concerning complaints over the same percentage regardless of business scale, regulatory officials have said that a strong crackdown is inevitable for the nation to avoid another credit card fiasco.

The FSC has already instructed card issuers to conduct stricter risk management.

Like in 2002, a senior regulatory official has said, there is a high possibility that credit card companies will engage in reckless business expansion without appropriate risk management.

By Kim Yon-se (kys@heraldcorp.com)