[DigitalToday reporter Ji-young Lee (이지영)] South Korea's Financial Services Commission said on Tuesday it will issue an advance notice of a revision to the Banking Supervision Regulations that eases loan-to-deposit ratio standards for loans to regionally based companies and sole proprietors. The loan-to-deposit ratio is calculated by dividing won-denominated loans by won-denominated deposits, with a benchmark of 100 percent or less.

The step is part of measures to boost preferential finance for regions under a plan announced on Oct. 22, 2025, for 'five poles and three special zones' regional tailored funding supply that aims to expand funding from both policy finance and the private financial sector at the same time.

In policy finance, authorities previously decided to create a target system to expand regional financial supply, raising the share of regional supply from about 40 percent in 2025 to 45 percent by 2028, an increase of at least 5 percentage points. As a result, annual funding supply to regions is expected to expand to as much as 120 trillion won in 2028, up 25 trillion won from the current level. The National Growth Fund also plans to invest about 40 percent of its total committed amount in regions to support advanced strategic industries, a future growth engine.

The private financial sector also plans to pursue various measures to expand funding supply to regions, including strengthening the competitiveness of regional banks, reinforcing the role of savings banks and mutual finance as regional and retail finance institutions, and improving related regulations and incentives. The easing of loan-to-deposit ratio standards is intended to activate bank lending in regions through such regulatory and incentive improvements.

Currently, in calculating the banking sector's loan-to-deposit ratio, weightings of 85 percent are applied to corporate loans, 100 percent to sole proprietor loans and 115 percent to household loans. The commission plans to cut the weightings by 5 percentage points each for loans to companies and sole proprietors located in regions outside the Seoul metropolitan area (Seoul, Incheon and Gyeonggi). It will apply weightings of 80 percent to corporate loans and 95 percent to sole proprietor loans.

The commission said domestic banks' non-metropolitan lending stood at about 633 trillion won as of 2025. It estimated that, assuming current loan-to-deposit ratios are maintained, the measure could increase banks' capacity to lend to regionally based companies and sole proprietors by up to about 21 trillion won. That corresponds to increases of 14.1 trillion won in corporate loans and 7.0 trillion won in sole proprietor loans.

The revision to the Banking Supervision Regulations will go through the advance notice period until Feb. 11 and is set to take effect in the first quarter of 2026 after procedures including a resolution by the Financial Services Commission.