Toss Bank, South Korea’s third-largest internet-only bank, said on Thursday it would suspend new lending until the end of this year, after financial authorities refused to increase the new bank’s loan limit .
The banking arm of fintech giant Viva Republica said its 500 billion won ($ 422 million) loan limit ran out at 1 p.m. Thursday and decided to suspend lending services.
“The decision is taken to comply with the government’s household debt stabilization policy and also after taking into account all market conditions,” said a Toss Bank official.
Toss launched its official operation on October 5 with 1.7 million registered users ahead of launch.
Almost 300 billion won, or 60% of lenders’ funds, were loaned in just four days.
When applying for a banking license in 2019, Toss Bank said it plans to lend a total of 469.3 billion won, of which 34.9% the lender pledged to distribute to low and medium credit holders. Expanding financial inclusion for lean filers, who do not have access to decent financial services, is one of the government’s goals and motivations for approving internet-only lenders like Kakao Bank, K bank and Toss Bank.
However, the government appears more concerned about the country’s growing household debt, which stood at 1.052 trillion won ($ 885 billion) at the end of August, adding 6.5 trillion won to it. a year ago. Despite government efforts, loan growth has shown no signs of slowing down as more people have taken out loans to buy homes.
In August, financial authorities ordered local banks to stick to a maximum of 6% of total loan growth and lenders are also tightening their grip on loan amounts in line with the new guidelines.
Analysts said these lending regulations could impact internet-only banks.
“If household lending regulations are applied in the same way to Internet-only banks, they could hinder their growth,” said Jun Bae-seung, analyst at EBest Investment and Securities. “Toss Bank may need to revise its growth strategy,” added Jun.
Jun pointed out that this regulatory concern is negatively impacting Internet-only banks and their valuation in the market.
Kakao Bank shares plunged 40% from their record 92,000 won on August 19. Kakao Bank became the largest bank in terms of market capitalization when it went public in August based on market expectations that the lender may differentiate itself from traditional competitors.
Meanwhile, Toss Bank also said it was opening the service to some 1.1 million pre-registered users online Thursday afternoon. The bank attracted nearly 1.7 million pre-registrations ahead of launch and gradually opened up its services in order of registration.