Bank of Korea lends $4.3 million to staff amid loan curbs

Amidst the government's stringent measures to curb household debt, the Bank of Korea has provided housing loans totaling approximately 6 billion won (US$4.3 million) to 150 of its employees during the first half of this year. This practice has raised questions about fairness, particularly as commercial banks face stricter lending conditions.

According to data obtained by lawmaker Kim Sang-hoon, 122 employees utilized the loans for home purchases, amounting to 4.8 billion won, while 28 employees borrowed 1.15 billion won for housing rentals. The average loan amount was around 39.4 million won for purchases and 41.2 million won for rentals. The Bank of Korea offers these loans, capped at 50 million won, to employees with at least one year of service who do not own a home.

The interest rate for these internal loans was set at 3.5% annually, which is 0.8 percentage points lower than the average interest rate for new mortgages from commercial banks during the same period. Crucially, these loans are not reported to personal credit rating agencies and are not factored into the Debt Service Ratio (DSR) calculations. This means employees can secure additional loans from financial institutions without the Bank of Korea's internal loan amount impacting their DSR.

With commercial banks raising the bar for mortgage and rental deposit loans due to government regulations, the Bank of Korea's provision of relatively low-interest housing funds to its staff has led to discussions about equity. Critics suggest that this internal lending system could create an uneven playing field, especially when contrasted with the tighter credit environment faced by the general public.

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The Bank of Korea. News 1