Banks to maintain moderate credit policy on households with credit risks likely to increase in Q3 (survey)

SEOUL, July 11 (Yonhap) — South Korean banks are likely to maintain a moderate credit policy for households in the third quarter, but credit risks for them are expected to rise amid rising borrowing costs, a researcher said on Monday. investigation.

According to the survey conducted by the Bank of Korea (BOK) among managers in charge of credit affairs in financial institutions, including 18 banks, the index assessing the attitude of the bank towards loans secured by housing and unsecured loans to households stood at 14 and 19, respectively, for the July-September period.

The figure compared to 31 and 19 corresponded a quarter earlier.

A reading above zero means the number of lenders who will facilitate loans exceeds the number of banks planning to tighten lending criteria.

Banks “should maintain a moderate lending position in response to a slower pace of household loan growth,” the BOK said.

Household debt has increased in recent years as people took out loans to ride out the pandemic and bought homes amid soaring prices. Debt, however, has seen its growth slow recently amid tighter lending rules and rising borrowing costs.

Loans to households from local banks rose 2.8% year-on-year in April, a sharp deceleration from a 6.2% rise in January, the data showed.

The BOK has raised its key rate at a rapid pace in recent months to contain inflation, putting upward pressure on banks’ lending rates.

The central bank has hiked the rate five times – each by 0.25 percentage points – since August last year to 1.75%.

Rapidly rising borrowing costs have heightened concerns about credit risk for households.

The index measuring credit risk for households fell from 39 in the third quarter to 22 in the previous quarter, the data showed.

“Credit risks for households are expected to rise sharply due to factors such as rising debt and the burden of interest payments due to rising lending rates,” the BOK said.

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