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50 million won max set for retail investments in P2P

Jan 28,2020
The government has set the maximum limit of 50 million won ($42,443) for retail investors investing in peer-to-peer (P2P) businesses. This is up from the previous limit of 20 million won.

Additionally, those that are operating P2P businesses have to secure a certain amount of their own capital on the total investment balance.

The Financial Services Commission (FSC) on Monday announced the legislative implementation of consumer protection laws on P2P investment.

The FSC set the maximum limit for retail investors at 50 million won. But for real estate products, the maximum limit on investment is set at 30 million won.

This is because many of the P2P investment in Korea is concentrated on real estate projects.

However, those whose labor or business income exceeds 100 million won or their dividend income exceeds 20 million won can invest as much as 100 million won in P2P products.

According to the new rules P2P businesses have to maintain more than 70 percent of their own capital of the total amount.

For example it has to have a minimum of 500 million won in capital when the total investment balance is less than 30 billion won; 1 billion won when the balance is between 30 billion won and 100 billion won and 3 billion won in capital when it exceeds 100 billion won.

The maximum lending rate is 24 percent, the same interest limit applied on private loans.

The government raised the maximum limit for retail investors as P2P has recently been growing rapidly as an alternative investment source particularly as the central bank has kept the country’s key interest rate at the all-time low of 1.25 percent since October last year.

P2P is considered one of the key investment tools in an era where technology is changing the existing financial industry. P2P is a platform that offers investment options to investors and those that are seeking loans through means other than conventional financial institutions such as banks.

According to the financial authority there were 239 P2P companies with a total amount of investment at 8.6 trillion won. The number of investors amounts to roughly 400,000.

However, with its rapid growth there has been growing concerns over protection against fraud, such as some businesses closing shop after collecting large amounts of investment.

Last year, the National Assembly passed a law that allows the FSC to oversee P2P investment. Previously P2P investments were not under the direct supervision of financial authorities but only worked under a set of guidelines.

“While we have changed the regulation that acknowledges today’s market structure and sales means, we have adopted a system that will still protect investors,” said an FSC official.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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