South Korea imposes lending caps, liquidity rules on mutual finance companies

South Korea's Financial Services Commission mandated new lending limits and liquidity rules for mutual finance companies to promote healthy competition in the sector.

Starting Dec. 29, 2024, mutual finance businesses' credit extension to the real estate and construction sectors will be limited to 30% of the total lending, with the total amount capped at 50% of the total lending for each loan.

The businesses will also be required to maintain a 100% liquidity ratio, but smaller entities will be subject to lower liquidity requirements. Companies with total assets below 30 billion won in the preceding business year must maintain an 80% liquidity ratio, while companies with assets between 30 billion won and 99 billion won in the previous business year must maintain a 90% liquidity ratio.

For companies with at least 100 billion won in the preceding business year, a 90% liquidity ratio will be required initially for a year until Dec. 28, 2025. A 100% ratio will be required afterward, according to the regulator.

As of Jan. 12, US$1 was equivalent to 1,187.91 South Korean won.