By Kim Yon-se
Ruling party lawmakers and the government reached a consensus on relieving a large portion of households of their loan interest burden during discussions to revamp the financial services sector Friday.
The Financial Services Commission said that the 10 core reform plans for financial consumers were confirmed during its chairman Yim Jong-ryong’s meeting with lawmakers from the Saenuri Party at the National Assembly in Seoul.
They have agreed to promote the launch of lending products that would offer interest rates of less than 20 percent for citizens with low credit standings and microbusiness owners, said FSC officials.
An official noted that the products would be dubbed middle-rate loans, adding it would be provided by financial firms or state-controlled institutions.
Currently, those who are rejected from first-tier banks have to bear interest rate burdens of 20 percent to 30 percent if they resort to borrowing from secondary financial sector sources, such as mutual savings banks or capital services firms.
Further, private moneylenders charge borrowers rates of about 30 percent-34 percent even if they are officially registered lenders. The nation’s benchmark interest rate set by the Bank of Korea is 1.5 percent.
In contrast, borrowers with high credit scores or housing-collateral can enjoy loans with rates of 3 percent-5 percent per annum.
“(We) will focus on a plan in which citizens could directly experience the performance of the reforms,” said FSC chairman Yim. “Legislation and budget is needed for successful implementation.”
Rep. Kim Gwang-lim, the chief of Saenuri’s financiaal reform committee, pledged to “make a platform under which citizens would easily access financial firms, and financial firms could operate systems more voluntarily.”
A key overhaul plan of the 10 major reforms is the individual savings account for income earners.
The FSC ― in coordination with the National Tax Service ― plans to introduce the ISA, which will be designed to support wealth accumulation through such tax favors. Lawmakers have supported it.
The ISA, which comprehensively deals with savings, funds and other financial investments, will have the function of providing individuals with tax refunds totaling 550 billion won ($477 million).
Other agreements included a revision of the working hours of financial firm employees for better financial services and expansion of funding schemes to venture firms with three to seven years of service for their sustainable development.
(kys@heraldcorp.com)