Kim Byung-hwan, a candidate for the head of the Financial Services Commission, emphasized the need to expand the application scope of the Debt Service Ratio (DSR) regulations, which determine the loan limits considering the borrower’s income, during a press conference held at the Korea Deposit Insurance Corporation in Jung-gu, Seoul on the morning of the 5th. In response to questions from reporters, he suggested that restrictions on the sale of high-risk products, such as Equity-Linked Securities (ELS) based on the Hang Sang Index, should be limited, taking into account consumers’ financial choices. Kim stated that solidifying the DSR system is crucial in establishing a lending practice within a manageable repayment range.
The DSR is a regulation that calculates loan limits based on annual income and principal repayments. The current DSR regulation restricts the repayment amount to not exceed 40% of annual income.
Kim further mentioned the importance of implementing the regulation expansion gradually to avoid abrupt shocks to consumers. Regarding the postponement of the implementation of the Stress DSR regime, which reduces loan limits in two stages, he explained that it was adjusted considering difficulties faced by marginalized groups and the stabilization process of the real estate Personal Financial Plan (PF).
In response to questions about enhancing the Loan-to-Value (LTV) ratio, another major loan regulation, Kim expressed opposition, emphasizing the need for a thorough evaluation based on the impact on household debt trends, the housing market, and the stability of residential housing for low-income individuals and genuine demanders.
He also addressed concerns about restricting the sale of high-risk products such as ELS to professional investors, stating that limitations on the target market should consider financial consumer protection and choices. However, he agreed in principle to partially restrict the bank’s sale of high-risk financial products such as trust funds and private equity funds.
Kim also mentioned the necessity of establishing internal controls to prevent incomplete sales and stated that he would consider various expert opinions, overseas cases, and preventive measures to prevent recurrence.
Regarding suggestions for introducing punitive damages and class-action lawsuits in cases of incomplete sales, Kim noted the need to consider limitations on damages under civil law and the potential limitations of class-action lawsuits based on individual financial transaction details.