A view of ATM machines installed by major banks. (Yonhap)
SEOUL, July 28 (Korea Bizwire) — South Korea’s major banks are ramping up corporate lending and support for small businesses in response to President Lee Jae-myung’s recent rebuke of the financial sector for relying too heavily on mortgage lending to drive profits.
During a policy meeting on July 24, President Lee criticized banks for engaging in “easy money games” through real estate loans and urged them to play a more active role in financing productive investment and economic growth. His remarks signal a broader shift in the administration’s agenda toward “real growth” and away from debt-fueled real estate speculation.
Currently, the imbalance in bank lending is stark. As of July 24, home mortgage loans at South Korea’s five largest banks — KB Kookmin, Shinhan, Hana, Woori, and NH NongHyup — had increased 4.2% year-to-date to 602.5 trillion won ($460 billion), while small business loans grew just 0.4% to 664.7 trillion won. Despite higher default rates in the SME sector, pressure is mounting for banks to redirect capital toward the real economy.
Bank executives said they interpret the president’s comments as a call to reduce overreliance on low-risk, high-margin mortgage lending and instead support businesses, especially in strategic sectors and export-driven industries.
The file photo taken Sept. 22, 2024, shows a sign on the exterior of a bank in Seoul with information about the bank’s home equity loan program. (Image courtesy of Yonhap)
In response, banks are revising their strategies:
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KB Kookmin Bank plans to expand financing for national strategic industries by offering more unsecured loans backed by credit and technology guarantees. It also aims to partner with local governments to ease financial burdens for small merchants.
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Shinhan Bank will increase lending to promising firms, even at the expense of short-term profitability. It also aims to balance this by enhancing capital adequacy and profitability through international expansion and non-interest income streams.
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Hana Bank is boosting special-purpose corporate loan offerings and broadening support for SMEs and startups. The bank will also invest in new growth areas such as asset management, advisory services, and global expansion.
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Woori Bank plans to expand its “OneBiz Plaza” supply chain financing platform to 100,000 corporate clients by year’s end. It also offers discounted interest rates on 15 trillion won worth of corporate loans through Q3 and will extend further support in Q4.
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NH NongHyup Bank has committed 4.5 trillion won in SME and regional economy financing through partnerships with credit guarantee institutions. It also plans to support defense industry players like LIG Nex1 in technology development and global market expansion.
Following President Lee Jae-myung’s criticism of the financial sector for “chasing easy profits through interest games,” banking stocks fell across the board on July 28.
As household debt remains high — with the debt-to-GDP ratio exceeding 90% — the government is expected to continue pushing banks toward more “productive finance” while working with the Bank of Korea to establish long-term plans to reduce household leverage.
Still, some in the banking industry argue that blaming lenders alone for household debt growth is unfair, citing government housing policies as contributing factors. Others point out that corporate lending often requires higher capital reserves, complicating efforts to reallocate resources without affecting shareholder returns.
Nonetheless, with mounting regulatory and public pressure, South Korea’s banking sector appears poised for a structural shift — one that prioritizes enterprise over equity and productivity over property.
Ashley Song (ashley@koreabizwire.com)
