The South Korean government is revising the Enforcement Decree of the Banking Act to address concerns over excessive loan interest rates for borrowers using guaranteed loans. The policy aims to limit the proportion of guarantee institution fees that banks can reflect in their loan rates, following the Banking Act amendment passed on December 31, 2025. This move is a response to the need for inclusive finance for vulnerable groups, as outlined in national policy task 59. By restricting legal cost reflection, the government seeks to prevent banks from passing on excessive guarantee-related expenses to borrowers. The revision is part of broader efforts to strengthen financial support for low-income and disadvantaged populations.
The main beneficiaries of this policy are small and medium-sized enterprises (SMEs) and small business owners who rely on bank loans secured by guarantee institutions. Guarantee institutions affected include the Korea Credit Guarantee Fund, Korea Technology Finance Corporation, Agricultural and Fishery Credit Guarantee Fund, regional credit guarantee foundations, and the Korea Housing Finance Credit Guarantee Fund. For guaranteed loans, banks will be prohibited from reflecting more than 50% of the guarantee institution’s statutory contribution rate in the loan interest rate. For non-guaranteed loans, banks will not be allowed to reflect guarantee institution fees at all. This change is expected to significantly reduce the financial burden on borrowers.
The legislative notice for the revised Enforcement Decree will run from April 3, 2026, to May 14, 2026, lasting 41 days. Stakeholders can submit opinions during this period via mail, email, or fax to the Financial Services Commission’s Banking Division. After the notice period, the decree will undergo Cabinet approval and is set to take effect on July 1, 2026, alongside the amended Banking Act. The government encourages public feedback, including support or opposition with reasons, and requires personal or organizational details for submissions. The full text of the amendment is available on the Financial Services Commission website.
Frequently asked questions include: Who can submit feedback on the legislative notice? Any individual or organization may submit opinions during the notice period. What is the main change for borrowers? Banks will be restricted from reflecting more than 50% of guarantee institution fees in loan rates for guaranteed loans, and cannot reflect such fees for non-guaranteed loans. How will this affect SMEs and small business owners? The policy is expected to ease their interest rate burdens, making financing more accessible and affordable.
Metaqsol opinion: The South Korean government’s revision to the Enforcement Decree of the Banking Act is a clear step toward inclusive financial policy, specifically targeting the reduction of loan interest burdens for SMEs and small business owners. By limiting the proportion of guarantee institution fees that banks can reflect in loan rates, the policy addresses a key concern for borrowers who rely on guaranteed loans. The transparent legislative process, including a public feedback period, demonstrates a commitment to stakeholder engagement. This change is expected to enhance access to affordable financing for vulnerable groups and aligns with national objectives to strengthen financial support for disadvantaged populations.