Korea’s Financial Services Commission (FSC) said on 28 October that it and the Financial Supervisory Service (FSS) will introduce an inclusive finance evaluation system that grades 17 domestic banks each year on how much credit and debt relief they provide to low-income and lower-rated borrowers. The first results, covering 2026, will be published in March 2027, and non-bank lenders join the system next year. In RegMemo’s analysis, the plan gives Korea a public, graded scorecard for bank lending to vulnerable borrowers, with grades that will feed into how much each bank pays into microfinance programmes and how large its penalty surcharges are.
How the banks will be grouped and scored
The 17 banks are split into three peer groups: large banks, small and medium-sized banks, and internet-only banks. Each bank is ranked against its group. The FSS runs the process, and an evaluation committee chaired by a private sector appointee decides the final results. Each year’s assessment covers the previous year’s performance, with results announced in March.
The weights favour two activities. Supply of funds and debt adjustment each count for 35%. Corporate governance, social consideration and non-financial services each count for 10%. Banks can earn up to about 10% in extra points for their own inclusive finance initiatives, based on a qualitative review.
Supply of funds covers policy-based microloans and banks’ own microfinance products for lower-income borrowers and those with mid-to-low credit scores. The FSC says volume will be only part of the test: the evaluation will also look at interest rates, benefits for borrowers who repay on schedule, and lending to socially vulnerable groups.
Debt adjustment covers support given through the Credit Counseling and Recovery Service and court-administered procedures, banks’ own debt workout programmes and the cancellation of personal overdue debts. For in-house workouts, the evaluation will consider the level of principal forgiveness and the repayment record of borrowers who received support. The governance score is a qualitative review of each bank’s inclusive finance strategy, systems and processes. Social consideration measures participation in the youth future savings programme and interest rate reductions, and non-financial services cover the one-stop finance, employment and welfare programme and financial counselling and education.
Grades with money attached, from the second cycle
Banks will receive grades of S, A, B or C within their group, and the results will be published. The FSC says grades will carry incentives and penalties in two areas: the level of each bank’s microfinance contributions and the level of penalty surcharges. A C grade could therefore raise a bank’s microfinance contributions and the penalty surcharges it faces, while an S grade could lower both. The release does not give the size of the adjustments.
Those consequences start with the second cycle. Because 2026 is the first year of evaluation, the incentive and penalty scheme takes effect from next year’s cycle, so the March 2027 grades will be published without financial effects. The FSC also says the criteria will be reviewed by experts and next year’s version set by June, which leaves banks a short window to see the rules that will price their 2027 performance.
Internet-only banks get their own league
Placing the internet-only banks in a separate group means KakaoBank, K Bank and Toss Bank will be ranked against each other. Those banks have worked under FSC targets for lending to mid-to-low credit borrowers for several years, and the separate league lets the FSS compare them on the same products without measuring them against branch-based lenders that run large debt workout and counselling operations. The non-financial services criterion, which rewards in-person employment and welfare referrals, is the area where branch-based banks are likely to start with an advantage.
A public rating closer to the US model
The closest comparison is the US Community Reinvestment Act, under which federal bank regulators publish ratings of each bank’s record in meeting the credit needs of its communities, including low- and moderate-income neighbourhoods. CRA ratings are public and are considered when a bank applies to merge or open branches. Korea’s version differs in two ways. It ties grades directly to money, through contributions and penalty surcharges, and it focuses on individual borrowers and debt relief, with no geographic test described in the FSC release. Korea’s 35% weight on debt adjustment also has no direct CRA counterpart.
The same meeting covered non-performing loan management at public financial institutions. The FSC said it will push for the prompt resolution of long-term overdue debts and reshape how public institutions manage bad loans so that the process focuses more on helping distressed debtors, including self-employed borrowers and small merchants, recover.
What to watch
- March 2027: first grades for the 17 banks, covering 2026, published with no financial effect.
- By June 2027: revised evaluation criteria for the 2027 cycle, after an expert review.
- 2027: extension of the evaluation system to non-bank lenders, and the first evaluation cycle in which grades affect microfinance contributions and penalty surcharges.
- Details on how much a grade will change a bank’s contributions and surcharges, which the 28 October release does not give.
Primary sources
- Financial Services Commission, FSC Plans to Introduce Inclusive Finance Evaluation System and Bolster Management of Non-Performing Loans, 28 October 2026
Related: Korea plans to resolve failing banks, insurers and brokers in three to four days
Photo (cropped): S h y numis, CC BY 4.0 via Wikimedia Commons
