The Financial Services Commission is easing investment regulations for top online investment firms to expand funding for low to mid-credit borrowers.
On September 22, the commission announced a plan to activate funding for low to mid-credit borrowers in the online investment sector. With six years since the establishment of the online investment industry, the aim is to strengthen its role in providing mid-interest loans and alternative financing for these borrowers.
According to the commission, the cumulative loan amount in the online investment sector surpassed 20 trillion won as of August this year, but the business structure remains heavily skewed towards secured loans. As of the end of last year, the combined share of real estate-backed loans and stock loans exceeded 70%. In contrast, the share of unsecured loans has averaged only 11.6% over the past five years.
Notably, the proportion of low to mid-credit borrowers among unsecured loans was also lower than in other second-tier financial sectors. As of the end of last year, the online investment sector had a share of 63.1%, falling short of savings banks (99.7%), insurance companies (95.3%), and specialized credit finance companies (99.6%).
In response, the commission plans to introduce a system for 'top online investment firms' that have demonstrated strong performance in lending to low to mid-credit borrowers, alternative credit assessment capabilities, and sound management. Firms designated as top online investment firms will see eased funding regulations for personal and business loans to low to mid-credit borrowers. The limit on self-investment by these firms will increase from 20% to 40% of the fundraising amount, while the limit for investments linked to financial companies will rise from 40% to 50%.
The commission will also expand linked investments from financial companies. Currently, savings banks and some local agricultural cooperatives are involved in linked investments for online investment loans, but the authorities plan to increase participation from mutual financial sectors and broaden the scope of linked investments to include personal business loans.
The overall investment limit for individual investors in the sector will also be raised from 40 million won to 50 million won. However, limits on investments for the same borrower will remain unchanged.
Additionally, the commission aims to improve the convenience of loan usage for low to mid-credit borrowers. Currently, borrowers must repay existing loans before extending the maturity and recruiting new investors, which can incur additional financial costs. The authorities plan to establish an API for maturity extensions within the existing investment amount through a central record management system.
Support will also be provided for the use of specialized credit assessment models for small business owners, which utilize non-financial information such as sales, industry, and market data to increase personal business loans.
The procedures for the exit of underperforming online investment firms will also be revised. New grounds for mandatory cancellation will be established, and firms will be required to maintain their status within a certain scope for investor protection even after closure. Additionally, prior notice of closure, operation of complaint channels, and destruction of personal information will be mandated.
The Financial Services Commission plans to accept applications for innovative financial services and conduct reviews in the first quarter of next year to implement the introduction of top online investment firms for low to mid-credit borrowers and expand linked investments with financial companies.
* This article has been translated by AI.
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