The top South Korean financial regulator plans to restrict credit card issuance and curtail issuers’ marketing budgets to combat growing household debt in that country.
In a June 6 statement, the Financial Services Commission noted that credit card lending in South Korea has increased by more than 19% this year from a year ago, indicating an overheating market requiring more controls.
The commission noted it already has strengthened supervision of the country’s card firms, helping to rein in the growing debt, but it said more is required to avoid a repeat of the country’s 2002-03 card crisis.
In 2003, a string of policy and regulatory changes created an environment where cards were issued without much diligence. This resulted in a market where every cardholder owned almost four cards, and the national card debt amounted to about US$100 billion. Eventually, the Korean government had to bail out the card firms with a cash infusion.
Beginning later this month, the commission will adopt appropriate guidance on the country’s card firms’ asset growth as well as card issuance and marketing costs, it said without disclosing details.
The commission plans to review the card companies’ compliance with its guidance on a weekly basis, according to the statement. Companies failing a review face suspension of business, and their leaders also face disciplinary action.
The regulator says it has begun conducting inspections, which it will complete by June 24 before issuing the final guidelines.
The commission declined to comment beyond the statement.
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