South Korea rewrites bank loan-deposit rules to push regional lending

Regulators plan to upgrade rules and provide incentives to improve regional banks’ competitiveness.

South Korea has proposed changing the standard for calculating loan-to-deposit ratios for banks, aiming to encourage more lending to companies and individual business owners located outside the Seoul metropolitan area.

The proposed rule change is available for public comment until 11 February 2026, according to an announcement by the Financial Services Commission (FSC) earlier in January.

It will then go through an approval process before taking effect in the first quarter of 2026.

The FSC floated plans to upgrade rules and provide incentives to improve the competitiveness of regional banks.

Regulators also plan to strengthen the function of savings banks and mutual finance businesses in providing regional finance.

The rule change is part of a broader policy initiative to boost supply of funds to regional economies, the FSC said.

The proportion of policy funds given to non-Seoul metropolitan regions will be increased to 45% by 2028, from 40% in 2025. This is expected to push up the annual of policy funds to regional economies by KRW25t, to a total of KRW120t in 2028.