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Banks tighten risk control amid signs of rising loan defaults

All Headlines 08:33 July 09, 2018

SEOUL, July 9 (Yonhap) -- South Korea's major commercial banks are ramping up efforts to manage their lending risks amid signs of rising loan delinquencies, industry sources said Monday.

To counter a possible rise in delinquent loans, KB Kookmin Bank adopted a prediction model for "normalizing delinquent loans" in December last year.

The lender said it has made the prediction model more sophisticated, which classifies loans into 10 categories depending on the difficulty of collecting them and calculates how much could be retrieved.

"More efforts will be made to upgrade the prediction system to create a win-win situation for both customers and the lender," a KB Kookmin Bank official said. "We will keep closer tabs on lending in line with the government's policy of keeping rising household debt in check."

Banks tighten risk control amid signs of rising loan defaults - 1

KB Kookmin is not alone. Shinhan Bank, another major lender, recently rehired some 30 retired employees to scrutinize loans extended to small and medium-sized enterprises. Earlier in March, Shinhan re-employed about 10 retirees as loan monitors at its branches.

Woori Bank and KEB Hana Bank are also following suit by tighten monitoring of individuals and corporate borrowers, who are considered high risks, according to the sources.

Local lenders' tougher risk control comes as their loan delinquency rate climbed for the second straight month in May as more companies were late repaying their debts.

The rate for won-denominated bank loans more than 30 days overdue came to 0.62 percent at the end of May, up 0.03 percentage point from a month earlier, according to the data from the Financial Supervisory Service (FSS). Compared with a year earlier, the loan delinquency rate was up 0.04 percentage point.
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