Govt. plans to cut maximum legal lending rate to 20%

The government plans to gradually cut the maximum interest rate that private lenders can charge to 20 percent per annum, the financial regulator said Thursday.

In a parliamentary audit meeting, Financial Services Commission Chairman Choi Jong-ku said the plan is aimed at further easing the financial burdens on people. 

Choi said the government will review market interest rates and other economic factors before it cuts the maximum legal lending rate.

In February this year, the government lowered the maximum legal lending rate to 24 percent from 27.9 percent.

Last month, the National Assembly passed a bill that allows non-financial firms to boost their stake in Internet-only banks beyond the 4 percent ownership ceiling. Two Internet-only banks -- K-Bank and Kakao Bank -- were launched last year. 

The new bill permits non-financial firms to hold up to a 34 percent stake in web-only banks, a move intended to drive innovative growth in the financial sector.

The FSC has said it will give preliminary approval next year for two groups to launch Internet-only banks.

Choi told the meeting that the FSC will announce a plan to pick a third Internet-only bank in November.

K-Bank and Kakao Bank have challenged traditional banks in South Korea, forcing them to cut commission fees and renovate their online and mobile banking services.

However, the sustainable growth of online-only banks has been hampered by the ownership ceiling, and both KT and Kakao are unable to buy new shares in the banks' rights offerings.

During the meeting, Choi told lawmakers that the FSC will draw up measures to impose tougher restrictions against improper short selling.

South Korea prohibits so-called naked short selling, in which investors unload shares which they do not own, but permits investors to sell borrowed stocks. Despite the ban, some critics suspect that banned short selling actually takes place.

Choi said the FSC will closely watch the issue of naked short selling and pledged to improve stock trading rules for retail investors. (Yonhap)