Employees at Samsung Electronics and SK hynix who take home hefty performance bonuses will find that the windfall no longer buys them a bigger mortgage under tighter lending rules the government laid out Wednesday.
The Financial Services Commission (FSC) said it would keep household debt on a tight leash through the second half of the year while channeling more state money into semiconductors, AI and robots.
The commission will cap the annual increase in household debt at 1.5 percent, down from 1.7 percent last year, and tighten property-lending rules beneath that target.
Under the plan, only part of a performance bonus will count as annual income when a bank sets a borrower's mortgage limit. A large bonus will be treated as one-off income, so a smaller share of it will feed into the debt service ratio (DSR), the formula that caps borrowing against a person's income.
The ceiling on mortgages, already set at 600 million won ($403,000), will stay in place. What is new is that the bonus rule will apply to workers across the board, not only those at large companies. The goal is to stop a jump in bonuses from lifting how much a borrower can take out.
Banks face new limits of their own. If a bank expands mortgage lending for high-priced homes or for people who own several properties, regulators will treat those loans as riskier assets and require the bank to set aside extra capital. The heavier capital charge is meant to discourage banks from writing such mortgages.
The FSC will also tighten mortgage and jeonse, or lump-sum deposit, loan rules for people who own a single home but do not live in it.
The government made clear it would not budge, even as corporate profits and pay continue to swell.
“There are calls to ease the household-debt growth target, given that nominal economic growth is expected to top 10 percent this year, but the government has no intention of doing so,” said Shin Jin-chang, secretary general of the FSC. “Even if a borrower's annual income jumps 30 percent from a year earlier because of a bonus, we will apply their income'sthree-year average to the DSR and adjust how much of the bonus is counted.”
The logos of Samsung Electronics, left, and SK hynix, whose record earnings have fueled intense debate in Korea over how to manage the extraordinary wealth generated by the semiconductor supercycleYONHAP
On the other side of the ledger, the government will widen its push into technology. The size of the National Growth Fund, a public-private vehicle that invests in semiconductors, AI and robots over five years, will increase to 200 trillion won from 150 trillion won.
The commission will set up a specialist fund manager, Korea Strategic Technology Partners, to channel up to 10 trillion won of public and private money into national strategic technologies such as quantum computing and nano AI semiconductors. It will also launch an 880 billion won ultra-long-term fund for fields that need investment horizons of a decade or more, and create a so-called Startup Build-up guarantee-backed loan for early-stage companies less than three years old.
The plan steers more funding to the provinces and to young people as well. Investment in the provinces' mainstay industries will rise to 16 trillion won a year from 12 trillion won, and the government will create a 1 trillion won growth engine preferential guarantee for regional firms. It also plans a financial product that gives young investors tax breaks on stocks and other assets, along with a 200 billion won guarantee-backed loan for promising youth that trims interest rates and guarantee fees for young founders.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
