FSC Unveils New Administration's Financial Sector Measures to Ensure Stability in People's LivelihoodsJul 14, 2022

FSC Chairman Kim Joo-hyun announced the new administration’s financial sector measures for ensuring stability in people’s living conditions on July 14. The measures were discussed at the 2nd emergency meeting for stabilizing people’s living conditions held by President Yoon Suk Yeol earlier on the same day.


Financial Measures for Ensuring Stability in People’s Living Conditions


(Basic Direction)  Strengthen efforts for providing financial supports through refinancing options, debt adjustment and emergency funds to help alleviate burdens on vulnerable groups such as small merchants, households, young adults and lower income earners facing difficulties amid rate hikes.


I. Easing Financial Burdens on the Self-employed and Small Merchants


Support the self-employed and small merchants’ recovery efforts by adjusting their debt payment burdens in line with their payment capabilities.


a) Make a transition from the current system of financial rescue centered on payment deferments (since April 2020) to a system centered on making fundamental improvements to the financial structure focused on alleviating payment burdens

(New Start Fund)  Provide debt adjustment by purchasing some KRW30 trillion in bad debt (or at-risk debt)

- Loan term (maximum 1~3 years), long-term installment payment (maximum 10~20 years), interest rate reduction

- Principal reduction (60~90%) provided at a considerable rate to delinquent borrowers with overdue payments of 90 days or more

(Refinancing Loan)  Convert high interest rate loans (with interest rates of 7% or higher) to low interest rate loans (KRW8.7 trillion)

(Funding for Business Operation)  Funding support for business remodeling, reorganization or improvement (KRW42.2 trillion)


b) Prepare a close-knit system of support for small merchants to ensure that there are no loopholes after the termination of the loan maturity extension and payment deferment program currently in place until the end of September 2022


Maximum loan term of one year (interest-only payment) with five years of installment payments already put in place for deferred principal and interest payments

Seek responsible management by individual financial institutions to ensure that maturity extension and payment deferment are still made available seamlessly without an abrupt debt collection taking place even after the end of September


Appropriate sharing of small merchants’ bad debt risks between borrowers, financial sectors and the government


c) Strengthen collaboration and synergetic effects between the small merchant consulting program offered by the Ministry of SMEs and Startups (MSS) and financial support programs while promoting the private sector’s service offering such as market analysis using big data


Seek government-sponsored financing support program offering preferential benefits on interest rate and maximum lending amount to small merchants who have completed the consulting (online sales support, marketing, etc.) program offered by the MSS

Provide support for enhancing the competitiveness of small merchants by promoting the use of business consulting services offered by government-sponsored financial institutions (Korea Inclusive Finance Agency, Industrial Bank of Korea, Korea Credit Guarantee Fund, etc.) and private sector financial institutions’ market analysis based on big data analytics, etc.


II. Alleviating Financing Burdens Related to Housing


Reduce interest payment burdens of home mortgage borrowers and ease housing related cost burdens of jeonse loan borrowers through provision of sufficient support for funds.


a) (Reduce Payment Burden)  Provide support for converting variable interest rate loans to fixed interest rate loans and seek extension of loan maturity


Provide KRW40 trillion in mortgage refinancing program (called the relief conversion loan) for refinancing of variable rate home mortgage loans which will be converted to fixed interest rate loans

- Inject additional KRW5 trillion (from KRW20 trillion to KRW25 trillion) to this year’s government-sponsored mortgage refinancing program without adding to fiscal expenditures and offer additional interest rate reduction for young adults with low income background (10bp)

Reduce debt payment burdens by extending the maximum loan maturity from 30 years currently to 40 years for private sector financial institutions and from 40 years currently to 50 years for government-sponsored financial institution (Korea Housing Finance Corporation)


b) (Ensure Stability for Renters)  Reduce housing related costs for renters through preferential loan and tax benefits


Expand the cap on low interest rate guarantees for jeonse loans to help alleviate interest rate burdens when using jeonse loans

Increase the jeonse price eligibility and maximum loan amount of government-sponsored jeonse loans for young adults

Expand tax exemption for principal and interest payments made on jeonse and monthly rent (from KRW3 million per year to KRW4 million per year)


c) (Ease Rate Hike)  Prevent financial companies from passing on interest rate burdens via market competition


Introduce a monthly disclosure of interest rate comparisons to allow consumers to check and compare net interest spreads (NIS)

Improve the reasonableness and transparency in interest rate calculations through an overhaul in the interest rate spread calculation system and strengthening bank’s self-assessment on interest rate calculation and internal control system

Encourage financial sectors to prepare and launch own financial products tailored to support vulnerable debtors


III. Strengthening Debt Adjustment for Young Adults to Support Restart


Newly introduce a special debt adjustment system for young adults and strengthen its ties with existing programs to help prevent long-term social stigmatization of failed investment attempts by young adults or low-income groups.


a) Introduce a special program for quick debt adjustment at CCRS


Provide support for reduction in interest payment and payment deferment (temporarily for one year) to young adults even if they have been ineligible to apply previously (e.g. before accruing overdue debt) in order to ensure quick recovery and restart for young adults


b) Prevent excessive debt collection worries via KAMCO’s overdue debt purchase


Extend the application period for KAMCO’s personal overdue debt purchase program (KRW2 trillion) from the end of June 2022 currently to the end of 2022


c) Support quick restart through strong linkages between financial companies, CCRS and the Court System


Strengthen ties and cooperation by setting up a consultative body made up of related institutions (financial companies’ own pre-workout program, CCRS’ debt adjustment program and the court’s personal bankruptcy proceedings)

Promote a fast-track proceeding between CCRS and the court to support young adults and low-income earners’ quick recovery and return to society


IV. Improving Financial Support for Low-income Earners and Low-credit Holders and Stamping Out Financial Crimes Targeting Vulnerable Groups


Provide sufficient funds to ensure stable living conditions for those that are unable to access the traditional financial system and protect them from financial crimes such as vishing scams.


a) (Microfinance)  Improving low-income earners and low-credit holders’ access to both public and private sector financial services


Provide KRW10 trillion in microfinance products this year for low-income households and vulnerable groups (average for 2017~2021: KRW7.9 trillion)

- The role of government-sponsored financial services is crucial to prevent a fallout of low-credit holders amid a narrowing difference between the maximum legal lending rate (20%) and the market rate

- Strengthen provision of funding support for living expenses to vulnerable groups such as young adults, low-credit holders and low-income workers

Review ways to stably secure funding for microfinance services that are currently operated on a temporary basis

Promote banks to offer more lending products with preferential rates to low-income earners and review and expand online-only banks’ lending to mid-to-low credit holders

Introduce (in 2023) a long-term (up to 10-yrs) savings product with benefits exclusively for young adults to help them accumulate assets


b) (Financial Crimes Targeting Vulnerable Groups)  Strengthening response system for financial crimes targeting lower income households, etc.


Improve the response system to better cope with evolving and advancing vishing scam methods

Strengthen protections for victims of vishing scams by expanding payment suspension of accounts used in fraudulent activities and returning unlawfully earned money back to victims

Strengthen crackdown and seek improvements in investor protections to root out fraudulent activities such as spreading false and misleading information about stock markets using online social media platforms




Authorities will implement the support measures intended for each vulnerable sector—such as small merchants, housing, debt adjustment and microfinance—as promptly as possible. Except for the measures that require amendments to the existing law, the implementation of measures will be completed in Q3 2022 in line with public demand and policy environment.


While making efforts to stabilize financial markets, authorities will communicate with the vulnerable groups such as young adults and low-income households to listen to their difficulties and continue to seek additional measures to help relieve their burdens. To this end, authorities will (a) review and respond to risk factors through the financial risk response taskforce and (b) maintain communication and seek additional support measures through the taskforce on resolving financial difficulties in vulnerable sectors.


Authorities will closely monitor the effects of these measures and any changes in economic conditions in the future to prepare additional measures if deemed necessary.

* Please refer to the attached PDF for details.