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Banks to get tougher on lending screening in Q1: BOK poll

All News 13:39 January 07, 2019

SEOUL, Jan. 7 (Yonhap) -- South Korean lenders are expected to make it tougher for people to extend loans in the first quarter of the year in line with tightening state regulations aimed at curbing real estate prices, a central bank poll showed Monday.

The overall index measuring banks' "attitude" toward extending home-backed loans to households came to minus 8 for the January-March period, according to the Bank of Korea (BOK).

A reading below zero means banks will implement tougher screening on loans, while a reading above the break-even point means a move to ease lending requirements. In the fourth quarter of last year, the figure stood at minus 30.

"The tightening seems attributable to the debt service ratio (DSR) rules at the end of October," a BOK official said.

As a key barometer in monitoring household loans, the DSR gauges the amount a borrower must pay in principal and interest in proportion to yearly income.

A ratio of 70 percent or over is categorized as a risky loan, and one over 90 percent constitutes a high-risk loan, with banks required to keep risky loans below 15 percent and high-risk loans below 10 percent of their total lending.

According to the survey, local lenders' stance toward fresh loans to big firms stood at zero in the first quarter, while those to small and mid-sized firms came to minus three, unchanged from the previous quarter.

The quarterly BOK reading was based on a survey of 15 banks and 184 nonbank lenders from Nov. 26 to Dec. 14.

Banks to get tougher on lending screening in Q1: BOK poll - 1


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