Summary

  • South Korea’s Financial Supervisory Service said it is pushing to restrict general unsecured credit loans from private lenders to prevent excessive debt stemming from high-risk investments such as virtual assets by active-duty soldiers.
  • The FSS said loans to active-duty soldiers from the top 30 private lenders jumped from 350 million won ($254,000) to 24.2 billion won ($17.5 million), driven by high-risk investing including online gambling and virtual assets.
  • The FSS said it will continue to allow collateralized loans and small emergency cash loans, while revising the private lending sector’s standard operating guidelines within this year, enforcing the measure through industry self-regulation, and strengthening financial education for service members to prevent reckless investing.

Forecast Trend Report by Period

South Korea’s Financial Supervisory Service is moving to restrict general credit loans from private lenders to active-duty soldiers to prevent excessive debt tied to high-risk investments such as virtual assets.

The proposal was discussed at the fifth meeting of the Financial Consumer Protection Advisory Committee on Nov. 12, chaired by FSS Governor Lee Chan-jin, the regulator said on Nov. 15.

Loans to active-duty soldiers from the top 30 private lenders registered with the Financial Services Commission surged to 24.2 billion won ($17.5 million) at the end of last year from 350 million won ($254,000) at the end of 2022. The FSS cited indiscriminate borrowing for online gambling and high-risk investments such as virtual assets as one of the main causes.

The agency plans to limit general unsecured credit loans from private lenders to active-duty soldiers. Banks and savings banks generally do not extend such loans to service members, but some private lenders have been offering them by accepting copies of payroll account passbooks as proof of income.

Collateralized loans and small emergency cash loans will remain available, reflecting demand for urgent living expenses.

The FSS plans to incorporate the measure into the private lending industry’s standard operating guidelines within this year and enforce it through industry self-regulation. It also plans to strengthen financial education for military personnel to help prevent gambling and reckless investing.

Uk Jin