Home music industry South Korea seeks to establish legal framework for fast-growing P2P lending market

South Korea seeks to establish legal framework for fast-growing P2P lending market

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South Korean financial authorities are rushing to put in place a legal framework for the growing peer-to-peer lending market, seeking to encourage investment by raising the ceiling while strengthening protection measures for investors, announced Monday. officials.

The Financial Services Commission, the Financial Supervisory Service and the Korea Finance Institute jointly held a public hearing at the Korean Banking Federation, inviting industry officials and academics to lay the groundwork for a regulatory bill P2P.

The occasion reflected the earlier consensus among financial authorities that there was a need to devote a bill exclusively to regulating the sector, rather than simply tweaking the rules on conventional lending.

P2P lending has seen drastic growth in recent years, with loans accumulated in this sector reaching 4.8 trillion won ($4.3 billion) at the end of last year, up from just 600 billion won two years earlier. early. The number of individual investors also passed the 250,000 mark.

While seeing this fintech business model as a potential growth engine for the stalled financial market, market supervisors have increasingly expressed concerns about the lack of regulation.

The FSC earlier issued a set of administrative guidelines, saying lenders should issue more public notices, but the guidelines were not legally binding.

Financial Services Commission Chairman Choi Jong-ku speaks at a public hearing on P2P regulation on Monday. (FSC)

“P2P finance has now established itself as a key fintech sector, so it’s time to legislate a bill that can systematically protect investors and borrowers,” FSC Chairman Choi Jong-ku said. , during the hearing.

“It is also more desirable to establish a new bill regarding P2P lending, instead of clinging to the conventional legal framework.”

There are currently five bills pending in the National Assembly that deal with P2P regulation – three represent proposals for new legislation and two would revise existing legislation.

Ongoing legislative discussions will only deal with new bills and exclude revision bills, according to Choi.

“The Financial Investment Services and Capital Markets Act provides limited protection to lenders, while the Credit Business Registration and Financial Services User Protection Act tends to neglect investors,” FSC officials added, calling for an exclusive P2P regulatory bill.

The government’s current draft suggests that the minimum capital of a P2P lender be raised to 1 billion won, higher than the requirement for a stock-type crowdfunding broker.

“As P2P lenders trade both investors and borrowers, they should be held to greater liability,” the officials explained.

Also, the authorities seek to strengthen the advertising regulations of P2P lenders to prevent them from exaggerating the advantages of their services and to oblige them to warn investors of the risks.

By Bae Hyun-jung ([email protected])