New rules also restrict monthly stock loan growth to 30% of non-stock lending as P2P sector balances surge 71.5%
Financial authorities have taken emergency measures regarding stock purchase loans (stock loans) in the online investment-linked finance (P2P finance) sector, which have surged rapidly due to recent demand for debt-fueled investment in the stock market.
A risk management plan will be implemented, capping new stock loan amounts at 30% of the previous month's general loan new business volume and limiting individual borrower loan limits to 1 billion Korean won.
On July 15, financial authorities announced that the "Risk Management Plan for Stock Loans in the P2P Finance Sector" will be implemented immediately from July 16. This measure aims to prevent the deterioration of soundness in the P2P finance sector as stock loan balances have risen sharply recently.
P2P (P2P finance) loans are a financial service that connects investors and borrowers through an online platform, rather than financial companies lending their own funds.
There are assessments that as banks have raised personal credit loan criteria, demand for debt-fueled investment has shifted to P2P loans. In fact, as of the end of June this year, the stock loan balance in the P2P finance sector was 898.3 billion Korean won, a sharp increase of 71.5% (374.6 billion Korean won) compared to the end of last year (523.7 billion Korean won).
Under the financial authorities' measures, P2P finance companies must maintain monthly new stock loan amounts within 30% of the total new loan volume (excluding stock loans) from the previous month. However, exceptions are granted for P2P finance companies that manage their stock loan balances at the end of each month from July this year to be below the balance as of the end of June.
For example, if Company A executed a total of 10 billion Korean won in new loans last month, including 5 billion Korean won in stock loans, the stock loan limit for this month would be restricted to 1.5 billion Korean won. This is because the company is obligated to manage within 30% of the pure linked loan balance (5 billion Korean won), which is the total new loan amount from last month (10 billion Korean won) minus stock loans (5 billion Korean won).
Individual borrower limits are also imposed. The financial authorities have instructed each P2P finance company to manage stock loan limits per borrower within 1 billion Korean won.
A Financial Services Commission official stated, "We plan to closely monitor the implementation status of each P2P finance company and, if necessary, guide the strengthening of stock loan risk management in the sector through measures such as meetings with management."
