The Bank of Korea's Monetary Policy Committee approved a reform plan for the financial intermediary support loan system on the 23rd, aimed at strengthening monetary policy tools and expanding support for regional small and medium-sized enterprises (SMEs). The reform seeks to enhance the system's flexibility in responding to economic conditions and improve financial accessibility for vulnerable sectors. The Bank of Korea announced the decision after amending the 'Bank of Korea's Lending to Financial Institutions Regulation,' marking a shift toward more adaptive credit support mechanisms for SMEs nationwide and in regional areas.
Bank of Korea Creates SME Credit-Linked Support Program
The centerpiece of the reform is the creation of a new 'SME Credit-Linked Support' program designed to flexibly adjust quotas and interest rates according to economic conditions. The program targets SMEs broadly rather than specific sectors and allocates quotas based on banks' quarterly net increases in SME lending. Policy-linked loans and loans to certain industries will be excluded from the calculation. The Bank of Korea stated that higher weighting will be given to loans for low-credit-rated firms, unsecured credit borrowers, and companies with short operational histories to enhance financial access for vulnerable sectors and high-productivity SMEs. Financial institutions will receive incentives such as expanded quota allocations and preferential lending rates through performance evaluations, and participation by internet-only banks is under consideration. The program is scheduled to launch in the second half of 2027.
Regional SME Support Quota Expanded After 12-Year Freeze
The Bank of Korea will expand the quota for the 'Regional SME Support' program, which has been fixed at 5.9 trillion won since 2014. Regional quota distribution, including the increased amount, will be determined by comprehensively considering changes in financial and economic conditions. The expansion is scheduled to take effect in the first half of 2027.
Trade Finance and New Growth Programs to Be Phased Out
The 'Trade Finance Support' and 'New Growth & Employment Support' programs, which have been in operation for an extended period and carry quasi-fiscal characteristics, will be gradually reduced and abolished. The Bank of Korea explained that these programs have constrained the flexible operation of financial intermediary support loans by providing continuous credit supply to specific sectors, and that similar support is already provided through other policy financial institutions. To minimize the impact on financial institutions and existing beneficiary companies' funding, the Bank of Korea will announce the termination date for new loan origination support in 2027 in advance and continue support until the maturity of existing loans.
Reform Implementation Timeline Set for 2027
The Bank of Korea will maintain the total financial intermediary support loan ceiling at 30 trillion won while implementing reforms in stages. In the first half of 2027, the 'Regional SME Support' quota will be expanded. In the second half of 2027, the 'SME Credit-Linked Support' program will be introduced. The gradual reduction and abolition plan for 'Trade Finance Support' and 'New Growth & Employment Support' will also be announced in 2027. In the medium to long term, the Bank of Korea plans to operate the system centered on two programs: 'SME Credit-Linked Support' and 'Regional SME Support.'
![Bank of Korea financial intermediary support loan reform diagram]()
FAQ
What did the Bank of Korea announce on the 23rd regarding SME support?
The Bank of Korea's Monetary Policy Committee approved a reform plan for the financial intermediary support loan system on the 23rd. The reform includes creating a new 'SME Credit-Linked Support' program that will flexibly adjust quotas and interest rates based on economic conditions, and expanding the 'Regional SME Support' program quota, which has been fixed at 5.9 trillion won since 2014.
When will the new SME Credit-Linked Support program launch?
The 'SME Credit-Linked Support' program is scheduled to launch in the second half of 2027. The expanded 'Regional SME Support' quota will take effect in the first half of 2027, and the phaseout plan for 'Trade Finance Support' and 'New Growth & Employment Support' will be announced in 2027.
Why is the Bank of Korea phasing out the Trade Finance and New Growth programs?
The Bank of Korea stated that these programs have constrained the flexible operation of financial intermediary support loans by providing continuous credit supply to specific sectors. The decision also considered that similar support is already provided through other policy financial institutions.
