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  • [금융/투자/외환] Amendment to the Detailed Regulations on Supervision of Mutual Savings Bank Business
    • Competent Ministry : Financial Supervisory Service
    • Advance Publication of Legislation : 2018-06-22
    • Opinion Submission Deadline : 2018-08-01

(1) Reasons for Proposal
□ Implement as part of the Capital Regulation Reform Plan for Productive Finance*
* Announced by the Financial Services Commission and the Financial Supervisory Service on Jan. 22, 2018
◦ Raise the risk weight of the BIS ratio of high-risk mortgage loans to the bank level

□ Deregulate to facilitate dealing with balance loans of the ownership of a lot in a building for savings banks

□ Provide the grounds for which to exclude the period for supplementing materials from the review period, where the terms and conditions are reviewed

□ Delete the relevant matters since the detailed criteria for mid-range interest rate loans are transferred to the Supervisory Regulations

□ Modify the business report format according to the amendment of the Enforcement Decree of the Credit Business Act and the Regulation on Supervision of Mutual Savings Bank Business

(2) Major Provisions

1. Raise the risk weight of high-risk mortgage loans (Attached Table 1)

□ (Current) Apply 35% or 50% of risk weight*

* ① First mortgage & within 60% of LTV & household loans: Risk weight 35%
  ② Other mortgage loans: 50%
□ (Improvement plan) Break down the risk weight at the bank level, in accordance with ① LTV ratio bracket, ② mortgage ranking, and ③ repayment condition

 ◦ Break down the risk weight by 35%, 50%, 70% and 75%, and apply 70% or 75% to high-risk mortgage loans*

* ① Subordinated mortgage loans which are more than 60% of LTV or non-first mortgage (50% → 75%)
  ② Extension and refinance without repaying more than 10% of the limit (35% or 50% → 70%)

Improvement plan for the risk weight of mortgage loans

Current

Improvement plan

 Descriptions

Risk weight

Descriptions

Risk weight

First mortgage and household loans within 60% of LTV

35%

First mortgage and household loans within 60% of LTV

35%

Household loans or corporate loans other than the above conditions

 

*(Example) Setting-up a first mortgage and a subordinated mortgage with an LTV over 60% or not a first mortgage

50%

First mortgage and corporate loans within 60% of LTV

50%

First mortgages, and household loans or corporate loans with an LTV over 60%

Within 60% of LTV of the balance

50%

Over 60% of LTV of the balance

75%

Household loans or corporate loans other than the above conditions


 *(Example) Setting-up subordinated mortgages which are not a first mortgage

75%

Household loans or corporate loans extended or refinanced without repayment of 10% or more of the loan limit of the household loans to which are applied a risk weight of 35% or 50%

70%

Note) Apply the risk weight of 100% if the borrower is a construction business entity, real estate business entity or real estate-related rental business entity
2. Deregulate the dealing requirements of balance loans for the ownership of a lot in a building (Attached Table 9)
□ (Current) Unlike banks and insurance, savings banks are not able to use the selling price of a lot in a building as the mortgage value when dealing balance loans for the ownership of a lot in a building.
 ◦ In the absence of a KB Real Estate Market Price or a market price of the Korea Appraisal Board, they must receive an appraisal at an extra cost.
→ This makes savings banks difficult to grant balance loans for the ownership of a lot in a building.

□ (Improvement plan) Enable savings banks to calculate the mortgage value of balance loans with the selling price of a lot in a building in the same manner as banks and insurance companies (increasing the regulatory equity).

3. Provide the grounds for which to exlcude necessary period required to supplement the materials of terms and conditions from the review period (Article 19-4)
□ (Current) If a savings bank omits part of the submission documents when reporting terms and conditions or there is a problem with the details of the terms and conditions, it is necessary to supplement the materials; however,
 ◦They have difficulties in securing a sufficient reviewing period because no additional period for supplementing the materials is given except the review period (10 business days).*
* For banks and credit finance corporations, the period required for supplementing or obtaining advice is excluded

□ (Improvement plan) Provide the grounds for excluding the period required for supplementing the materials by savings banks from the review period when reviewing terms and conditions

4. Delete the detailed criteria for mid-range interest rate loans (Article 19-7)
□ (Current) Reflect matters delegated by Supervisory Regulations in Detailed Regulations to set forth detailed criteria for mid-range interest rate loans* that are preferential when calculating the credit grant ratio within the business area

* The weight by credit rating, the weighted average interest of mid-range interest rate loans notified to savings banks, etc.
□ (Improvement plan) Delete the relevant provisions as the said criteria is transferred* to the Supervisory Regulations
* Expected to reflect in the Superviosry Regulations the unity among related business areas such as credit finance corporations and credit unions, etc., to provide greater incentive for mid-range interest rate loans (currently being notified in advance).

5. Modify the business report to reflect the revision of upper regulations (Attached Form 4)
□ Currnet status of executives, compliance officers and risk managers (AE103)
◦ Align the provision of appointment and dismissal of executives, etc., with the definition of the Act on Corporate Governance of Financial Companies and add the current status of the appointment and dismissal of risk managers

□ Current status of individual and corporate credit loans by the range of interest rate (AE131, AE140)
◦ Break down the interest rate interval (5% → 1%) of the status of personal credit loans according to a decrease in the legal maximum loan interest rate* and newly insert the current status of corporate credit loans by interest rate interval
* the Enforcement Decree of the Credit Business Act came in to effect (Feb. 8, 2018)

□ List of loan soundness classification by business type (corporate and individual business entity) (AE047, AE133)
 ◦ Reflect the subdivision* of business type and amendments in accordance with the Korea Standard Industry Code of Statistics Korea (Announcement of Statistics Korea 2017-13)
* Reorganized from the current 11 business types to 21 types.

□ Provide the grounds for calculating expected losses for the receivables eligible for the allowance for bad debts (AE034, AE060)
◦ Reflect the amendments of the Regulation on Supervision of Mutual Savings Bank Business, which raised the allowance level for savings banks to the level of banks*
* Gradually heighten accumulation criteria of the allowance for bad debts to the level of banks in 2018, 2019 and 2020 and accumulate additional allowance for high-risk loans (loans with an annual interest rate of 20% or more)

□ Current status of limit management (AE038)
◦ Reflect the content that the loan limit criteria for credit business entities of savings banks will be regulated by law*, for which the administrative guidance is underway
* A regulation review is underway after the prior notice of the Supervisory Regulations of Mutual Savings Bank Business (Apr. 5, 2018 ~ May 15, 2018)

□ Current status of loan operations for individuals and small and medium enterprises within the business area (AE134)
◦ Add the loan balance of mid-range interest rate loans outside the business area and ease the regulation on the reporting period to identify the loan balance of mid-range interest rate loans prescribed in the Supervisory Regulations

□ Report on the current status of business delegation or acceptance of business delegation (AE141)
◦Establish a relevant form to report the current status of business delegation or acceptance of business delegation by reflecting the amendments of the Regulation on Business Delegation of Financial Institutions (Nov. 14, 2017)

□ Work report related to financial product classification criteria
(AE061, AE062, AE063, AE064, AE024, AE136, AE122)
◦ Reflect the change of terminology in K-IFRS (No. 1109)
* e.g.) Financial assets designated at fair value through profit or loss → Financial assets at fair value through profit or loss


Regulatory effect assessment
  • 3.규제영향분석서(고위험 주담대)_f.hwp [download]
Legislative proposal (draft)
  • 1.상호저축은행업감독업무시행세칙 개정 사전예고(안).hwp [download]