Credit-Specialized Financial Firms' PF Cap Left at 30%... Looser Than Mutual Finance and Savings Banks' 20%, with No Enforcement Date

SEOUL

The real estate project financing (PF) loan limit for specialized credit financial business companies, including credit card and capital companies, will remain unchanged at 30% of their credit assets. This is 10 percentage points higher than the 20% PF ceiling established for mutual financial cooperatives to match the level of savings banks. On October 23, the Financial Services Commission (FSC) issued a prior notice of a proposed amendment to the Regulation on Supervision of Specialized Credit Finance Business, announcing that it would introduce new separate caps of 30% each for loans to the real estate sector and the construction sector, as well as a 50% combined cap on total exposure encompassing PF, real estate, and construction loans. The FSC explained that the move is intended "to preemptively manage concentration risks related to real estate-related industries." As of late March this year, the delinquency rate on PF loans across the financial sector stood at 4.65%, and at 4.56% as of late June, while the delinquency rate on land-collateralized loans held by savings banks, specialized credit finance companies, and mutual financial cooperatives had surged to 31.88% at the end of March.

FSC Sets New Sectoral Limits While Keeping PF Cap Unchanged at 30%

According to the FSC, real estate PF loans (including debt guarantees) extended by specialized credit finance companies are currently restricted to within 30% of their credit assets. The proposed amendment leaves this PF limit intact. Instead, it creates new separate limits capping real estate industry loans and construction industry loans each to within 30% of credit assets. A combined ceiling of 50% will be imposed on the aggregate sum of PF loans, real estate sector loans, and construction sector loans.

The FSC cited regulatory gaps across financial sectors as the background for the revision. The FSC stated, "Unlike other sectors such as savings banks and mutual finance, there have been no separate regulations governing sectoral lending limits related to real estate." Under the new rules, specialized credit financial firms can still allocate up to half of their credit assets to PF, real estate, and construction lending combined.

The regulatory revision also bundles tightened management of payment gateway (PG) firms by credit card companies and the deregulation of the equipment rental business. Provisions addressing real estate risk concentration and provisions expanding rental business operations were combined into a single public notice revision.

FSC Cites 'Preemptive Management' While Rolling Out Mandatory PG Evaluations and Rental Easing Together

The FSC outlined three objectives for this regulatory overhaul. The real estate limits are intended "to preemptively manage concentration risks in real estate-related industries." The mandatory PG evaluations stem from the assessment that systematic settlement risk management has become necessary as online card payment gateway transactions have grown. The easing of rental rules was described as a measure to expand consumer choice and revitalize competition in the rental market.

Going forward, credit card companies will be required to evaluate the PG firms they conduct business with both when signing or renewing contracts and on a quarterly basis during contract terms. Evaluation items will include settlement risks such as unsettled balances and illegal transactions by PG firms. The FSC stated that it will mandate measures such as withholding contracts, refusing renewals, or terminating contracts early based on the outcomes of these evaluations and inspections.

Regulations on the rental business will be relaxed. When issuing a prior notice for an amendment to the same supervisory regulation on April 29, 2024, the FSC stated that it would classify rental operations as an incidental securitization business while preventing excessive operations by including securitized rental assets in the existing rental volume cap. Currently, the quarterly average balance of total rental assets is capped within the average balance of lease assets. The amendment expands the total handling ceiling to within the sum of "lease plus installment financing assets"—while keeping it capped so as not to exceed lease assets—and abolishes restrictions on handling caps by individual asset items. However, entry into the short-term rental market dominated by small and medium-sized operators will remain prohibited. The FSC added that specialized credit lenders engaged in the rental business plan to establish a mutual cooperation system with small and medium-sized car rental companies that lack fundraising capabilities by extending credit lines, deferring principal loan repayments, and channeling short-term rental demand—such as maintenance and replacement vehicles for accidents—to these smaller rental firms.

The FSC briefing materials published on the government policy briefing portal included a reference photograph of FSC Chairman Lee Eog-weon visiting the urban development site near Pungmu Station in Gimpo, Gyeonggi Province, on September 10 to host a roundtable meeting on PF project sites.

Mutual Finance Capped at 20% for PF Four Months Earlier; Specialized Credit Lenders Remain at 30%

A comparison with mutual financial regulations overhauled earlier highlights a clear disparity. At its regular meeting on June 17, the FSC passed an amendment to the Regulation on Supervision of Mutual Financial Business. That measure capped real estate PF loans at National Credit Union Federation of Korea, NongHyup, National Federation of Fisheries Cooperatives, and National Forestry Cooperative Federation entities to within 20% of their total loans, while restricting the combined exposure of real estate, construction, and real estate PF loans to within 50% of total loans. At the time, the FSC stated that the 20% PF ceiling was "on par with savings banks." This limit will take effect on April 1, 2027. Workplace and organizational cooperatives whose common bond comprises real estate and construction workers are exempt from the sectoral lending caps on real estate and construction.

The mutual financial regulatory revision was a follow-up measure to institutional improvement plans unveiled at the Mutual Finance Policy Council on December 22, 2025. Mutual finance took approximately six months from announcement to formal resolution, whereas the draft revision for specialized credit lenders entered the notice phase four months after that resolution. The combined cap is identical for both sectors at 50%. However, the standalone PF limit stands at 20% for mutual financial institutions and savings banks, compared to 30% for specialized credit lenders.

The baseline asset metric is also different. The mutual finance ceiling applies to total loans, whereas the limit for specialized credit financial institutions is calculated against credit assets.

The revision for mutual finance extended beyond loan limits. For real estate PF loans that have long been classified as "substandard or below," the final collateral valuation amount can no longer be used as the expected recovery value, requiring the accumulation of "loan loss provisions commensurate with risk," in the words of the FSC. Loans with no delinquency or with delinquencies of less than three months, as well as loans where auctions or public sales are impossible due to litigation, are exempted. The recommended net capital ratio to total assets for credit unions will be raised annually from 2.5% in 2028 to 4% by 2031, while the mandatory minimum requirement will rise from -2.5% in 2028 to 0% by 2031. The management guidance ratio for central federations of mutual financial cooperatives will be raised to "7%, equivalent to the level of savings banks," with credit unions required to meet 7% by 2028, NongHyup and Suhyup by 2032, and the forestry cooperatives subject to the 7% threshold starting in 2034. In contrast, the real estate provisions in the amendment for specialized credit lenders went no further than introducing new sectoral limits.

Land-Collateralized Loan Delinquency Rate in Non-Bank Sector Climbs to 31.88%

According to materials from the real estate PF status review meeting convened by the FSC at its main conference hall at 2:00 p.m. on July 3, the delinquency rate on 10.4 trillion won in land-collateralized loans held by savings banks, specialized credit lenders, and mutual financial cooperatives reached 31.88% at the end of March, up 2.20 percentage points from the previous quarter. The FSC explained, "This was because the denominator—the loan balance—decreased while the amount in delinquency saw a slight increase."

PF indicators across the entire financial sector also deteriorated in the first quarter. The delinquency rate on the 115.5 trillion won PF loan balance stood at 4.65%, up 0.77 percentage points from the prior quarter. The FSC cited "seasonal factors" as the primary reason. Credit classified as "caution" (C) or "troubled" (D) in project feasibility assessments totaled 16.4 trillion won, accounting for 9.6% of the total PF exposure of 169.8 trillion won, expanding by 1.7 trillion won in a single quarter. The FSC stated that total exposure at the end of March shrank by 4.5 trillion won compared to the previous quarter because project completions, liquidations, and restructurings outpaced new loan originations.

Loan loss provisions remained at the previous quarter's level at 10.8 trillion won. With bad credit rising, the provision coverage ratio dropped from 73.5% to 65.8%, and the ratio of PF loans classified as substandard or below rose from 9.30% to 10.04%. Cumulative resolution and restructuring of troubled project sites reached 18.9 trillion won through the end of March. Of this total, liquidations accounted for 13.6 trillion won (approximately 72%) and restructurings for 5.3 trillion won (approximately 28%). However, the first-quarter performance stood at only 0.4 trillion won, dropping sharply from 2.0 trillion won in the preceding quarter. In the same materials, the FSC noted that new PF originations in the first quarter reached 16.8 trillion won, up 5.6 trillion won (50%) from a year earlier, while delinquent bonds across the financial sector stood at 5.37 trillion won, down slightly from 5.40 trillion won in the same period of the previous year.

During the meeting, private-sector experts acknowledged stability in the PF market but stressed that "past insolvencies must not be repeated." With representatives from the Construction Association of Korea, the Korea Housing Association, and the Korea Real Estate Developers Association in attendance, the construction industry stated that "an increasing number of project sites are experiencing fundraising difficulties due to persistent increases in construction costs and rising market interest rates." The meeting was presided over by the Secretary General of the FSC. Attendees included the FSC's Director General of the Financial Policy Bureau, Director of the Financial Policy Division, and Director of the Non-Bank Financial Division; the FSS's Assistant Governor for Consumer Protection Coordination, Director General of the Supervisory Innovation Bureau, and Director General of the Non-Bank Financial Examination Bureau 1; officials from the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport, the Bank of Korea, the Korea Housing Finance Corporation, Korea Asset Management Corporation, and the Korea Institute of Finance; representatives from the Korea Federation of Banks, Korea Financial Investment Association, Credit Finance Association, Korea Federation of Savings Banks, and the Korean Federation of Community Credit Cooperatives; researchers from the Construction & Economy Research Institute of Korea; and officials from Shinhan Bank, Hana Bank, and NICE Investors Service.

At this meeting, the FSC extended six out of nine temporary regulatory easing measures through December of this year. Three measures relaxing the Net Capital Ratio (NCR) for the financial investment sector were excluded from the extension, with the relief maintained only until maturity for existing exposures. The three excluded measures were the NCR risk weight relaxations previously applied to the purchase of self-guaranteed PF-ABCP, residential real estate loans, and the conversion of debt guarantees into loans. Moving forward, a completely overhauled real estate NCR framework will apply to new exposures. The six measures granted an extension include exempting corporate officers and employees from liability and allowing separate asset quality classification (common to all sectors); permitting repurchase agreement (RP) sales and relaxing K-ICS risk factors (for insurance); and easing securities holding limits and lending limits within operational territories (for savings banks). The FSC stated that it will determine the timing for normalizing the six extended measures "in consideration of real estate PF conditions in the second half of 2026."

Indicators showed modest improvement as of the end of June. According to monitoring meeting data released by the FSC on October 14, PF exposure reached 168.8 trillion won, down 1.0 trillion won from the previous quarter, and the PF loan balance stood at 115.8 trillion won, turning upward for the first time since the end of 2023. The FSC stated that new capital injections also expanded. The delinquency rate fell to 4.56%, while loans categorized as "caution" or "troubled" dropped to 15.1 trillion won (9.0% of the total), and cumulative resolution and restructuring reached 19.7 trillion won. The FSC evaluated that "the improvement of financial soundness in the PF market continues."

Delinquency Rate of Non-Card Specialized Credit Lenders Rises 0.18%p in Half a Year

According to the "Business Performance of Specialized Credit Financial Business Companies in the First Half of 2026" released by the Financial Supervisory Service (FSS) on August 27, the delinquency rate for non-card specialized credit lenders, such as capital companies, stood at 2.29% at the end of June. This was 0.18 percentage points higher than at the end of last year. The substandard-or-below credit ratio also rose 0.19 percentage points to 2.85%.

During the same period, net profit for non-card specialized credit lenders reached 2.2352 trillion won, up 452.3 billion won (25.4%) year-on-year. The loan loss provision ratio stood at 133.0% and the adjusted equity capital ratio was 19.1%, both exceeding regulatory thresholds. The delinquency rate on credit card receivables for specialized credit card companies came in at 1.61%, up 0.07 percentage points from the end of last year. Delinquency rates for credit card sales receivables and card loan receivables reached 0.86% and 3.35%, up 0.05 percentage points and 0.14 percentage points, respectively. The ratio of substandard-or-below loans for credit card companies fell slightly to 1.13%. Specialized credit card companies posted a net profit of 1.2934 trillion won, an increase of 68.3 billion won (5.6%). The FSS cited higher merchant fee revenues and installment card fee revenues as contributing factors, though it noted that total costs also rose due to higher card-related expenses and selling and administrative expenses.

The FSS stated that it will closely monitor profitability trends among card and non-card companies, and manage soundness by promoting internal debt workouts and strengthening the management of troubled loans. The texts of both FSC PF review meeting releases presented specialized credit finance companies grouped alongside savings banks and mutual financial cooperatives under the broader metric of "non-bank financial companies."

In Same Month, FSC Defers PF Capital Regulations on Residential Projects by Two Years

Nine days before announcing the tightened limits for specialized credit lenders, the FSC made a decision to postpone the implementation of a key PF regulation. At its October 14 review meeting, the FSC "finalized a two-year deferral of equity capital ratio regulations for residential project PF." For non-residential project sites, the rules will take effect from 2027 as originally scheduled.

This decision represents an extension of the joint government housing supply measures announced on August 13. At that time, the Ministry of Land, Infrastructure and Transport, the FSC, the Office for Government Policy Coordination, and the Ministry of Economy and Finance unveiled a plan to supply an additional 230,000+ units in the Seoul metropolitan area alongside a "Comprehensive Financial Package for Real Estate Market Stabilization," prioritizing "the expansion of real estate PF guarantees and liquidity supply." Household debt growth was to be managed at around 3%. The government explained that the measures were designed "to resolve the contraction in housing supply that has persisted since 2022." The comprehensive financial package included new guarantee products for redevelopment and reconstruction projects, expanded private financial support such as relocation loans, and measures to curb speculative and household debt through tighter regulations like the Debt Service Ratio (DSR). To enhance execution in meeting the target of commencing construction on 1.35 million units in the capital region between 2026 and 2030, the government also created a cross-ministry inspection meeting for expedited housing supply. The official title of the FSC's October 14 meeting was likewise the "Meeting to Review Real Estate PF Conditions and Financial Support Measures to Facilitate Housing Supply."

The materials for the October 14 meeting listed follow-up measures to the August 13 policy, including intensive on-site monitoring of 279 project sites in regulated areas across the metropolitan region, the operation of a PF Financial Difficulty Resolution Center, expanded approvals for PF guarantees, and the creation of KAMCO funds. The government stated that through these efforts it would induce new capital supply, differentiate the management of performing and non-performing sites, and enhance financial stability. At the July 3 meeting, government officials stated, "We ask for the financial sector's cooperation so that new capital can be supplied smoothly to normal, viable project sites."

During the same period, the FSC urged the financial sector to expand PF financing and granted a grace period on capital rules for residential project sites, even while placing new ceilings on specialized credit lenders' real estate-related loans.

Regulatory Revision Targeted for Q1 Next Year; Public Comments Due by Dec. 2

The FSC is issuing prior notice of the regulatory change from October 23 through December 2. It stated that following a review by the Regulatory Rationalization Committee and an FSC resolution, the revision will be finalized by the first quarter of next year.

When adopting the mutual finance revisions in June, the FSC set an implementation date of April 1, 2027, "in order to provide sufficient preparation time for compliance." The draft amendment for specialized credit finance companies does not specify an effective date, transition measures for firms already exceeding the caps, sector-wide loan balances for real estate and construction, their proportion against credit assets, or the number of firms currently in breach of the new caps.

Inquiries regarding the revision may be directed to the FSC's Non-Bank Financial Division (02-2100-2991, 2994) and the FSS's Specialized Credit Financial Supervision Bureau (02-3145-7447).

Sources (KST)

• Policy Briefing Policy News (Financial Services Commission) · 2026-10-23 · FSC Strengthens Loan Limits on Real Estate and Construction Sectors for Specialized Credit Financial Companies · https://m.korea.kr/news/policyNewsView.do?newsId=148974200&pageIndex=1&cateId=&repCode_P=&smenu=EDS01
• Financial Services Commission Press Release · 2026-07-03 · Holding of Real Estate Project Finance (PF) Status Review Meeting · https://www.fsc.go.kr/po010103/87252
• Financial Services Commission Press Release (Published on KDI Economic Information Center) · 2026-10-14 · Holding of Real Estate Project Finance (PF) Status Review Meeting and Review Meeting on Financial Support Measures to Facilitate Housing Supply · https://eiec.kdi.re.kr/policy/materialView.do?num=288009
• Financial Supervisory Service Press Release (Published on KDI Economic Information Center) · 2026-08-27 · Business Performance of Specialized Credit Financial Business Companies in the First Half of 2026 [Provisional] · https://eiec.kdi.re.kr/policy/materialView.do?num=285863
• Financial Services Commission Press Release · 2026-06-17 · FSC Approves Revision to the Regulation on Supervision of Mutual Financial Business · https://fsc.go.kr/po010103/87126
• Ministry of Land, Infrastructure and Transport, Financial Services Commission, Office for Government Policy Coordination, Ministry of Economy and Finance Press Release (Published on KDI Economic Information Center) · 2026-08-13 · Additional Supply of 230,000+ Units in Metropolitan Area, Expediting Housing Supply and Strengthening Financial Support for End-Users Including Youth · https://eiec.kdi.re.kr/policy/materialView.do?num=285383
• Joint Press Release by 4 Ministries including Ministry of Land, Infrastructure and Transport (Published on KDI Economic Information Center) · 2026-08-13 · Additional Supply of 230,000+ Units in Metropolitan Area, Expediting Housing Supply and Strengthening Financial Support for End-Users Including Youth (Housing Policy Division, Ministry of Land, Infrastructure and Transport Material) · https://eiec.kdi.re.kr/policy/materialView.do?num=285342
• Financial Services Commission Press Release · 2024-04-29 · Prior Notice of Regulatory Change for Proposed Amendment to Regulation on Supervision of Specialized Credit Finance Business · https://www.fsc.go.kr/no010101/82183