[EDITORIALS]The consumer burden

Financial authorities are trying to curb the surge in household loans, which have been a major source of profits for domestic commercial banks. They are trying to both raise loan interest rates and cut deposit rates, which is putting a squeeze on consumers, who now face lower interest income and rising debt service costs.

Local banks have their own reasons to support this strategy. Stricter rules for household lending, including higher loan-loss provisions and higher risk weighting for such loans in banks' capital adequacy ratios, carry more costs to banks. Therefore, bankers say, they have no choice but to raise lending rates and lower deposit rates to cover those costs.

Household debt should be kept in check, but it is unfair for banks to pass the burden of increased cost and declining profitability to household customers alone. Some banks refuse to make loans that they earlier promised to buyers of new apartments, and some borrowers who have never failed to pay interest on time cannot extend loan maturities.

It is clear that the sudden tightening of funding for households, along with the government's move to reduce limits on credit card loans, will increase financing costs for individual borrowers and lead to more household delinquencies. The cut in deposit rates will also probably cause household savings rates to fall further and lead to a surge of money market transactions for unproductive uses such as real estate speculation.

This pressure on household loans comes because the government missed its chances to raise the benchmark call interest rate gradually. Now the economy is slumping and the government hesitates to change its macroeconomic policies. It is necessary to control the speed of the crackdown on household borrowing.

Heavy pressure on household lending could create many credit delinquents. Banks should not take advantage of the government's curb on household loans. They should ditch their old habit of depending on mortgage loans, which pose relatively low risks, cut costs and create corporate demand for loans.