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Non-bank lending hits record high in 2016

All News 15:00 February 11, 2017

SEOUL, Feb. 11 (Yonhap) -- Loans extended by South Korea's non-bank lenders reached an all-time high last year while their overall lending also increased by the largest amount in the country's history, central bank data showed Saturday.

Outstanding loans extended by non-bank lenders came to 724.14 trillion won (US$629.7 billion) as of end-2016, up 13.7 percent from a year earlier, according to the data from the Bank of Korea.

A 13.7-percent on-year spike marks the third fastest rate in 10 years after a 19.2-percent rise in 2007 and 17.6 percent in 2008.

However, in terms of sheer amount, loans extended by non-bank lenders increased by a net 87.3 trillion won last year, the highest amount since the central bank began compiling such data in 1993.

Non-bank lenders include mutual savings banks, asset management firms and insurances companies, but not private lenders.

Non-bank lending hits record high in 2016 - 1

Such an increase apparently followed what experts here have called a balloon effect created by stricter rules on bank loans.

The local government greatly tightened its regulations on bank lending after the country's household debt reached a record high of 1,295.8 trillion won as of end-September.

In January, household loans extended by local banks added only 58.5 billion won from the previous month to 708.17 trillion won, compared with a 3.5 trillion won on-month increase in December, the central bank said earlier.

However, the government measures aimed at curbing household debt came while the central bank maintained its key interest rate at record low levels, apparently encouraging people to continue expanding their borrowing, only from the non-bank sector.

The BOK's key rate has remained at the record low of 1.25 percent since June 2016.

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