[DigitalToday reporter Lee Ji-young (이지영)] From July, the interest-rate burden on new bank loans and renewed loans will ease. That is because a revised Banking Act and its enforcement decree will take effect, preventing banks from reflecting some statutory costs in setting loan rates, including required reserves, deposit insurance premiums and contributions to the Korea Inclusive Finance Agency.

The Financial Services Commission and the Financial Supervisory Service said on June 29 that the interest-rate burden for borrowers taking out new bank loans will ease as the revised Banking Act and its enforcement decree take effect from July 1.

Banks have currently reflected some statutory costs, such as various legally mandated contributions, in their loan spreads when calculating loan rates. But related laws were revised after calls to balance the beneficiary-pays principle of policy guarantee schemes with banks' social responsibility.

Under the revised rules, banks cannot reflect required reserves, deposit insurance premiums and contributions to the Korea Inclusive Finance Agency in loan rates. However, required reserves and deposit insurance premiums have already not been reflected by all banks since January 2023, following revisions to best-practice guidelines on loan rates in October 2022.

Contributions to guarantee funds such as the Korea Credit Guarantee Fund, Korea Technology Finance Corporation and regional credit guarantee foundations will also be partially restricted.

For guaranteed loans made with a guarantee, banks cannot reflect 50 percent or more of the contribution in the loan rate. For non-guaranteed loans unrelated to guarantees, reflecting the contribution is fully prohibited.

Banks also cannot reflect in loan rates the increased portion of the education tax rate additionally imposed on financial and insurance businesses.

The education tax was raised from 0.5 percent of revenue to 1.0 percent on the portion of revenue exceeding 1 trillion won, and the change prevents banks from passing on that increase through loan rates.

Banks must conduct internal checks at least twice a year to ensure compliance with the ban on reflecting statutory costs and must record and manage the results. That obligation must also be reflected in banks' internal control standards.

Financial authorities said the revisions apply to cases in which loan contracts are newly signed or renewed from July 1. They said they plan to continue checking whether the banking sector complies with the ban on reflecting statutory costs.