(C) KED Global
SEOUL – The South Korean National Assembly passed a controversial amendment to the Banking Act today, designed to regulate the calculation of loan interest rates by commercial banks and prevent the transfer of specific institutional costs to financial consumers.
The amendment was approved in a plenary session with 170 votes in favor and one against among the 171 lawmakers present. The ruling People Power Party (PPP) abstained from the vote, allowing the bill to pass primarily with the support of the opposition Democratic Party of Korea (DPK) and other liberal parties.
Key Provisions Target Add-on Interest Rate Calculation
The core of the revised Banking Act mandates strict limitations on the costs banks can incorporate into the "add-on interest rate" (가산금리, gasan-geumri), which is an additional margin charged on top of the base interest rate. Specifically, the new law prohibits banks from including costs such as:
Reserve Requirements (지급준비금)
Deposit Insurance Premiums (예금자보험료)
Contributions to Various Guarantee Institutions (각종 보증기관 출연금)
Furthermore, the amendment caps the reflection ratio of contributions to guarantee institutions—such as the Korea Technology Finance Corporation and the Korea Credit Guarantee Fund—at 50%. It also prevents the upcoming increase in the education tax, levied on the finance and insurance industry next year, from being passed on to borrowers via the add-on interest rate.
DPK Fast-Tracks Bill Amid Political Conflict
The DPK pushed the amendment through after designating it as a "fast-track" bill in April when its deliberation was delayed in the National Policy Committee, chaired by a PPP member. The opposition bloc subsequently scheduled a vote on the Banking Act, the Criminal Procedure Act, and the Police Official’s Performance of Duties Act for the four-day period beginning December 11.
In response, the PPP initiated a filibuster yesterday afternoon (3:33 p.m. KST) to block the passage of the DPK-led legislative package. The filibuster, featuring speeches both against and for the amendment, was eventually terminated by a majority vote (three-fifths of the registered members) led by the DPK and its allies at 4:00 p.m. today, 24 hours after it began.
The newly revised Banking Act will take effect six months after its promulgation and will apply to loan agreements concluded or renewed after the implementation date.
Second Filibuster Ensues Over Police Act
Immediately following the Banking Act vote, the "Police Official’s Performance of Duties Act Amendment" was tabled. The PPP swiftly launched a second filibuster, with Representative Seo Beom-soo being the first speaker, protesting the bill.
This second amendment grants police officers the authority to directly restrain or disperse individuals launching propaganda leaflets toward North Korea, which the PPP strongly opposes, calling it the "Anti-North Korea Leaflet Ban Act." The ongoing filibuster standoff is expected to conclude on December 14, marking the end of a contentious four-day legislative battle.
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