Regulator to tighten rules on overdrafts

Financial authorities will tighten rules on unsecured loans from later this month, as they seek to prevent people from borrowing excessively to buy homes or invest in stocks, officials said Friday.

Effective Nov. 30, the Financial Services Commission (FSC) will stiffen loan limits for a home buyer to 40 percent of a property's value if the buyer's annual income exceeds 80 million won ($71,748) and holds unsecured loans worth more than 100 million won.

If a person buys a home in a regulated area within one year after taking out overdrafts worth more than 100 million won, the loans will be retrieved, FSC officials said.

The government has tightened rules on mortgage lending in a bid to curb rising housing prices, but people rushed to take out credit loans to buy houses amid cheap borrowing costs.

A rally in the stock market also prompted people to take out unsecured loans for stock investments, including public subscriptions for initial public offering (IPO) shares.

Local banks' non-mortgage loans gained 3.8 trillion won last month, accelerating from a 3 trillion-won increase in September.

Unsecured loans accounted for the bulk of banks' non-mortgage lending. (Yonhap)