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Banks likely to maintain tight grip on household loans in Q4

All News 12:00 October 18, 2021

SEOUL, Oct. 18 (Yonhap) -- Banks in South Korea are expected to maintain their tight grip on lending to households in the fourth quarter of this year as the government seeks to put a lid on borrowing, a central bank poll showed Monday.

According to the poll by the Bank of Korea, the index measuring the banks' attitude toward home-backed and unsecured loans came to minus 15 and minus 32, respectively, for the October-December period.

The corresponding figures in the third quarter were minus 35 and minus 29.

The lower the reading, the more likely banks will tighten their restrictions on lending. A reading below zero means that the number of lenders that will restrict lending surpasses that of banks planning to ease lending criteria.

"A significantly strengthened trend with regard to household lending is expected to continue from the previous quarter, affected by moves to tighten regulations on household loans," the BOK said in a press release.

A BOK official said that the survey also showed that banks are likely to toughen regulations on unsecured loans more than on home-backed loans in the fourth quarter.

Financial regulators are set to unveil additional steps to rein in household debt this month in a follow-up move after they applied stricter lending rules in July.

Banks expected credit risks for households to rise "significantly" due in part to a rise in lending costs and worries about income reduction of borrowers amid the coronavirus pandemic, the poll showed.

As of end-September, outstanding bank loans to households grew 6.5 trillion won on-month to 1,052.7 trillion won (US$877.9 billion), according to central bank data.

Last Tuesday, the BOK kept its policy rate unchanged at 0.75 percent for October after a quarter percentage-point increase in August, but hinted at the possibility of another rate hike next month.

kokobj@yna.co.kr
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