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Banks to keep eased stance in extending loans in Q1 on more lending capacity, competition

All News 12:00 January 18, 2023

SEOUL, Jan. 18 (Yonhap) -- Banks in South Korea are expected to maintain an eased stance in extending loans in the first quarter of the year given their increased lending capacity and intensifying competition, a central bank survey showed Wednesday.

According to the poll of officials handling credit affairs at financial institutions, including 18 banks, conducted by the Bank of Korea (BOK), the index gauging banks' lending attitude toward households and businesses stood at 13 in the January-March period.

The figure was one below the 14 in the previous quarter but far higher than the six registered in the third quarter of last year.

A reading above zero means the number of lenders that will ease lending surpasses that of banks planning to tighten lending criteria.

The BOK said that banks have such a lending attitude as they have secured more lending capacity from the government's move late last year to ease rules on loan-deposit ratio requirements aimed at injecting liquidity amid worries over a credit crunch.

Their intensifying competition to profit off loans will also likely contribute to the stance, it added.

The poll, however, said the credit risks for borrowers in the first quarter will likely mount due to a rising debt burden from high borrowing costs driven by the BOK's rate hikes to curb inflation.

The index gauging credit risks for households and businesses rose to 45 in the first quarter of this year from the previous quarter's 41.

Last week, the central bank hiked the benchmark interest rate from 3.25 percent to 3.5 percent, the highest level since late 2008. It also marked the seventh straight rate increase since April last year.

Banks to keep eased stance in extending loans in Q1 on more lending capacity, competition - 1


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