Banks to get tough on lending in 4th quarter

Home > Business > Finance

print dictionary print

Banks to get tough on lending in 4th quarter

Korean lenders are expected to be more fastidious in extending loans in the fourth quarter of 2018 as the government is tightening administrative and financial measures to curb soaring real estate prices, a central bank poll showed Monday.

The overall index measuring banks’ “attitude” toward extending home-backed loans to households came to minus 30 for the October-December period, compared with minus 23 a quarter earlier, according the Bank of Korea (BOK).

A reading below zero means banks will implement tougher screening for loans, while a reading above zero means a move to ease lending requirements.

The BOK said banks’ attitude index on demand for fresh non-mortgage loans is likely to reach minus 10 in the fourth quarter, widening from minus three in the previous quarter.

The new debt service ratio (DSR) rules goes into effect in October after a trial period of several months. Under the tightened DSR guidelines, lenders will check borrowers’ monthly debt obligations, including overdraft bank accounts and credit card loans, making it harder for people to take out fresh loans.

It is part of the government’s efforts to slow down the rapid growth pace of household credit, which reached nearly 1,500 trillion won ($1.33 trillion) in June.

Since the beginning of the year, the authorities have also churned out a series of measures to put high-flying housing prices under control, including a ban on bank lending to multiple home owners.

Despite such moves, apartment prices in the capital city of Seoul rose at the highest pace in a decade in September.

The BOK survey showed that local lenders’ stance toward fresh loans to big firms came to minus three in the fourth quarter, while the attitude toward small and mid-sized companies was seven for the next three-month period.

The quarterly BOK reading was based on a survey of 15 banks and 184 nonbank lenders from Aug. 24 to Sept. 7.

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)