SEOUL, Oct. 18 (Yonhap) – Banks in South Korea are expected to keep their household lending under control in the fourth quarter of this year as the government tries to limit borrowing, a central bank survey found on Monday.
According to a survey by the Bank of Korea, the index, which measures banks’ attitudes towards domestically secured and unsecured credit, was minus 15 and minus 32 for the period from October to December.
The corresponding numbers in the third quarter were minus 35 and minus 29.
The lower the value, the more likely banks will tighten their lending restrictions. A score below zero means that the number of lenders restricting lending exceeds that of banks trying to relax lending criteria.
“A significantly stronger trend in lending to private households is expected to continue from the previous quarter, influenced by the tightening of regulations on household loans,” says a press release from BOK.
A BOK official said the survey also showed that banks are likely to tighten regulations on unsecured loans more than domestic loans in the fourth quarter.
Financial regulators will take further steps to curb household debt in a follow-up step this month after applying stricter lending rules in July.
Banks expected household credit risks to “significantly” increase, in part due to increased borrowing costs and concerns about borrowers’ incomes falling amid the coronavirus pandemic, the survey showed.
At the end of September, outstanding bank loans to households increased by 6.5 trillion won to 1,052.7 trillion won (US $ 877.9 billion), according to central bank data.
Last Tuesday, the BOK left its key rate unchanged for October at 0.75 percent after a quarter of a percentage point hike in August, but indicated the possibility of a further rate hike next month.