South Korea commits to overhaul its mutual savings banks

It will expand functions, tighten governance, and set up a company for NPL management.

South Korea has committed to reforming regulations on its mutual savings banks, including expanding their customers to MMEs, allowing online P2P lending, and setting up an asset management corporation for bad loans.

The Financial Supervisory Commission (FSC) has committed to overhaul regulations about the function of savings banks, transitioning it away from the real estate sector and towards small businesses, according to an online post in February 2026.

This includes bringing down the securities holding limit to “a more reasonable level” in order to free up savings banks’ capacity to supply financing to growth industries, the FSC said.

Regulators also plan to open up the major business financing function of savings banks to middle market enterprises (MMEs) from its previous focus on small and medium enterprises (SME).

The FSC also mulled allowing savings banks to operate an online peer-to-peer (P2P) lending business, with the goal expanding the savings banks’ supply of credit to individual business owners and small merchants.

The FSC also plans to introduce an industry-wide asset management corporation for the savings banks to more effectively manage their non-performing loans (NPLs).

Mutual savings banks’ loan-to-deposit ratios will be adjusted for loans issued in the Seoul metropolitan area, with weight increased to 105% from 100% currently, whilst those outside the metropolitan area will be decreased to 95%.

Large scale savings banks that meet certain qualifications will be allowed to handle debit cards and prepaid electronic payments of their own.

Large-scale and medium-scale savings banks— or those with assets over KRW1t or more— will see their maximum credit for corporate entities and sole proprietors adjusted “to a more reasonable level,” the FSC said.

The FSC also plans to change the categorisation system to a “core-concurrent-and-incidental-business” system, and will also adjust broadcast advertising rules.

Separately, regulators committed to improved regulations to make savings banks subject to a capital buffer rule and restrict dividend distribution when they fall below a required capital level. They also promised better liquidity monitoring and risk management systems.

Large-scale savings banks with assets worth over KRW5t will be required to meet more rigorous capital rule standards in stages, whilst those with assets below KRW1t will see mandated external audit financial statements eased to a semi-annual basis from a quarterly basis.