Seoul: Banks in South Korea are expected to tighten lending standards in the fourth quarter, particularly for household loans, as authorities have tightened loan restrictions to address the overheated housing market, a central bank survey revealed Monday.
According to Yonhap News Agency, a Bank of Korea (BOK) survey of 203 financial institutions, including 18 banks and 26 mutual savings banks, indicated that the index measuring banks’ lending attitudes stood at minus 14 for the October-December period. A reading below zero suggests that more lenders plan to tighten rather than ease credit standards.
The survey showed that the figure compares with 7 in the first quarter, minus 13 in the second quarter, and minus 28 in the third quarter. By sector, the index for home mortgage lending stood at minus 28 for the fourth quarter, while that for loans to large corporations came in at 6.
A BOK official noted, “Lending attitudes toward businesses are expected to ease somewhat, while lending attitudes toward households are projected to tighten in line with the government’s real estate policy measures.” The official further added that the survey found credit risks for both companies and households are projected to remain a persistent concern amid domestic and global uncertainties.
The government has introduced a series of measures to cool the real estate market. Most recently, it designated 21 additional districts in Seoul as speculative zones, bringing all 25 districts in the capital under stricter regulations. It also tightened lending rules, reducing the mortgage loan cap to as low as 200 million won (US$139,665) from 600 million won set in June.