BOK probe on banks’ home loans

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BOK probe on banks’ home loans

Korea’s central bank plans to conduct for the first time a probe on major banks to evaluate their loans extended to households and firms in a bid to ensure financial stability, officials said yesterday.

The move comes after a law went into effect in December, widening the Bank of Korea’s role in preventing financial instability.

Monetary policy makers at the Bank of Korea agreed during their Thursday meeting to audit major banks and evaluate the status of their lending and interest rates.

The probe will likely be conducted sometime next month, after the BOK sends a request to the Financial Supervisory Service, the country’s financial watchdog, later this month.

“We cannot announce the list of banks that are subject to the probe, but it will be aimed at banks that are influential in the market,” said an official at the BOK.

Kookmin Bank, the country’s largest lender, as well as Shinhan, Woori and Hana, are likely to come under the BOK’s scrutiny, as well as the state-run Industrial Bank of Korea, Citibank and Standard Chartered Bank.

The probe will focus on loans extended to borrowers with bad credit, heavily indebted customers and others who are the most vulnerable to the economic recession, according to the official.

Even as BOK Governor Kim Choong-soo shrugged off worries earlier this month that household debts may set off a financial crisis in Korea, indebted households remained a source of concern for policy makers and market experts. Outstanding household debts stood at 912.8 trillion won ($806 billion) as of the end of 2011. Yonhap

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