À̹ÌÁö È®´ë South Korean lenders are forecast to tighten loan requirements for households and companies in the fourth quarter this year amid the economic downturn that has slowed income growth while increasing credit risk, a survey showed on Monday.
According to a survey conducted by the Bank of Korea (BOK) on loan behavior of financial institutions, the outlook for comprehensive lending practices index of local lenders stood at 2 for the October-December period. The index – between minus 100 and 100 – measures financial institutions¡¯ lending practices such as whether they will tighten screening rules.
A minus reading indicates more banks will toughen loan requirements on households by raising interest rates and tightening maturity conditions than in the previous quarter and vice versa for a reading above zero.
By sector, the survey showed that banks¡¯ lending practices index for mortgage loans and household loans each stood at -3, indicating that lenders would apply stricter loan evaluation on households.
The BOK said that banks have turned more conservative on providing household loans amid growing concerns over the economic downturn and implementation of a new loan-deposit ratio rule next year. Under the new rule, lenders with the ratio above 100 percent are restricted from loan activities, meaning that they would be required to reduce household loans that take up a big portion of overall loans while upping corporate loans.
À̹ÌÁö È®´ë The lending practices index for small- and mid-size corporates, meanwhile, improved to 7 amid increased competition among lenders to secure smaller firms as loan customers. The index for large companies came to -3.
The survey showed that non-bank financial institutions¡¯ loan screening will be toughened on credit card companies whose index stood at -13, mutual finance association -19 and life insurance companies -1. The index for mutual savings banks was 4.
Credit risk of households and corporations, meanwhile, is expected to grow.
The survey showed that lenders¡¯ comprehensive credit risk index outlook for the fourth quarter was 23. The credit risk index for households was 17.
The BOK said that the interest rate cut has led to a slight fall in lending rates but household income growth has slowed amid the sluggish economy, placing households with increased burden to repay debt.
The credit risk index for small- and mid-size companies was 30 amid growing alert on corporate repayment capability amid slowing economic growth. The index for large companies was lower at 13.
The survey also showed that credit risk of borrowers from non-banking financial institutions will worsen at mutual savings banks and credit card companies.
Lenders¡¯ comprehensive loan demand outlook index for the fourth quarter stood at 10. The index for demand for household mortgage loans was 10 and for general household loans 13. The figures show that lenders expect households¡¯ loan demand to increase in the coming months.
Demand for loans by small- and mid-size enterprises is also likely to expand with the index coming in at 17. The index for large companies, meanwhile, remained unchanged for the fourth quarter from the previous three months.
Loan demand from non-banks is expected to decrease across industries except for those from credit card companies, data showed.
By Song Min-geun and Lee Eun-joo
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]