The Financial Services Commission (FSC) published a package of measures aimed at the “sound development” of mutual savings banks, seeking a structural shift away from real estate and collateral-focused business models toward a more balanced, real economy-oriented approach. The plan combines changes to operating-practice rules intended to broaden and redirect credit supply with stepped-up expectations for soundness management and governance, scaled to the size and role of individual institutions. On “productive finance” and operating practices, the FSC plans regulatory reforms to support lending to SMEs, MMEs and small merchants, including adjustments to securities holding limits (including raising the unlisted stocks holding limit from 10% to 20% of equity capital), expanding major business financing from mainly SMEs to MMEs, and exploring expanded credit supply to sole proprietors and small merchants by allowing online peer-to-peer lending and phasing changes to the mid-range interest rate loan product. It will also recalibrate loan-to-deposit ratio weights to encourage regional credit supply by increasing the Seoul metropolitan area weight to 105% (from 100%) and reducing the non-Seoul weight to 95% (from 100%). Additional changes include allowing qualified large savings banks (BIS capital adequacy ratio of 13% or above) to issue their own debit cards and prepaid electronic payments, raising large and mid-sized institutions’ single-borrower credit limits for corporate entities and sole proprietors (for banks with KRW1 trillion or more in assets, to KRW14 billion and KRW7 billion from KRW12 billion and KRW6 billion, plus an additional KRW500 million to KRW1 billion for non-Seoul borrowers), revising business categorisation to a “core-concurrent-incidental” framework, and updating broadcast advertising rules. On soundness and governance, large savings banks with assets of KRW5 trillion or more will be required to meet bank-equivalent capital rule standards in stages, forward-looking criteria will be introduced for classifying business-loan asset soundness, and smaller banks (assets of KRW1 trillion or below, BIS ratio of at least 12% and delinquency rate of 4% or below) will shift from quarterly to semi-annual external audits. The FSC also outlined asset-size-based ownership caps (maximum 50% equity at KRW20 trillion or above, 34% at KRW30 trillion or above, and 15% at KRW40 trillion or above), stronger assessments of the suitability of largest shareholders, a capital buffer rule with dividend restrictions below required capital levels, enhanced liquidity monitoring via upgrades to real-time deposit monitoring, the creation of an industry-wide asset management corporation to manage nonperforming loans, and a regulatory basis for disposing of unintentionally acquired real estate within a set period (example given of three years). The FSC indicated it will move promptly on the necessary legislative and regulatory updates and continue engagement with the industry, related organisations and consumer groups to support implementation.
South Korea Financial Services Commission 2026-02-23
South Korea Financial Services Commission sets out mutual savings bank reforms to reorient lending toward the real economy and strengthen capital and ownership rules
The South Korea Financial Services Commission announced measures to reform mutual savings banks, shifting focus from real estate to a balanced, real economy-oriented model. Key reforms include regulatory changes to support SME and MME lending, adjustments to credit supply practices, and enhanced governance and soundness standards. The FSC plans to implement these changes through legislative updates and ongoing industry engagement.