Korea's financial regulator to rein in credit card loans, marketing costs

South Korea's financial regulator plans to limit credit card firms' excessive credit issuance and marketing costs.

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Compatition among credit card firms to issue credit and market their credit card products are increasing the country's household indebtedness, prompting the Financial Services Commission to take measures to slow down the sector's asset growth.

The FSC will adopt "appropriate growth rate" guidance on credit card firms' asset increases, new card issuance and marketing costs, the regulator said in a statement, without giving specifics.

"The FSC took the measures in order to prevent the credit card sector and other credit issuers from triggering risk factors to the local financial industry," it noted.

The Financial Supervisory Service, the executive arm of the FSC, is currently conducting one-month inspections till June 24 to look closely into credit card firms' card issuance practices. After the examination, the FSC will come up with proper punishments for the firms that illegally issued credit cards and loans to unqualified customers, the regulator said.

The FSC also plans to revise a law within this year to impose a ceiling on leverage rates of credit card firms and other credit issuers like consumer finance companies to limit the amount of assets they can hold in comparison with their net equity, the FSC said.

The regulator will also revoke a special law that allowed credit card firms to sell bonds worth up to 10 times their net equity, it said, adding that the abolition is expected to curb credit issuers' excessive borrowing.