Key Takeaways
- • South Korea's Financial Supervisory Service (FSS) is moving to restrict general unsecured credit loans from private lenders to active-duty soldiers, citing excessive debt tied to high-risk investments such as virtual assets and online gambling.
- • Loans to active-duty soldiers from the top 30 private lenders registered with the Financial Services Commission rose to 24.2 billion won ($17.5 million) at the end of last year, up from 350 million won ($254,000) at the end of 2022.
- • Collateralized loans and small emergency cash loans will remain available, while the restriction will be built into the private lending industry's standard operating guidelines within this year and enforced through industry self-regulation.
- • The FSS will also expand financial education for military personnel to curb gambling and reckless investing.
Summary
South Korea's Financial Supervisory Service is moving to restrict general credit loans from private lenders to active-duty soldiers, according to the regulator, which said the measure aims to prevent excessive debt linked to high-risk investments such as virtual assets. The proposal was discussed at the fifth meeting of the Financial Consumer Protection Advisory Committee on November 12, chaired by FSS Governor Lee Chan-jin, and the regulator announced the plan on November 15.
The FSS said 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 agency cited indiscriminate borrowing for online gambling and high-risk investments, including virtual assets, as a main driver of the increase.
Banks and savings banks generally do not extend such loans to service members. Some private lenders, however, have offered them by accepting copies of payroll account passbooks as proof of income. Under the plan, the FSS will limit general unsecured credit loans from these lenders to active-duty soldiers. Collateralized loans and small emergency cash loans will remain available to reflect 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 intends to strengthen financial education for military personnel to help prevent gambling and reckless investing.
The FSS said 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 agency cited indiscriminate borrowing for online gambling and high-risk investments, including virtual assets, as a main driver of the increase.
Banks and savings banks generally do not extend such loans to service members. Some private lenders, however, have offered them by accepting copies of payroll account passbooks as proof of income. Under the plan, the FSS will limit general unsecured credit loans from these lenders to active-duty soldiers. Collateralized loans and small emergency cash loans will remain available to reflect 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 intends to strengthen financial education for military personnel to help prevent gambling and reckless investing.
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