Korean banks expected to ease loan stance in Q1

Information on a bank's loan programs on the exterior of a lender in Seoul in July [YONHAP]

Banks in Korea are expected to ease their stance on extending loans in the first quarter of the year due to demand for home-backed loan refinancing programs, a central bank survey showed Tuesday.

According to the poll of financial institutions, including 18 banks, conducted by the Bank of Korea (BOK), the index gauging banks' attitude toward lending to households and businesses stood at five for the January-March period.

The figure is a jump from minus six the previous quarter and minus two during the third quarter of last year.

A reading above zero means the number of lenders that will ease lending surpasses that of banks planning to tighten lending criteria.

The BOK said banks' change in their attitude toward lending comes as demand for home-backed loan refinancing is expected to increase, it added.

Since early this month, a variety of mortgage-refinancing programs have been introduced by banks to lessen borrowers' financial burdens.

The poll also showed the credit risks for borrowers in the first quarter will likely remain high due to the rising debt burden from high borrowing costs driven by the BOK's rate hikes to curb inflation.

The index gauging credit risks for households and businesses stood at 31 in the first quarter of this year, unchanged from the previous quarter's 31.

Earlier this month, the BOK froze its key rate at 3.5 percent for the eighth straight session amid woes over a still weak economic recovery and slower-than-expected inflation moderation but signaled that it may shift toward ending its restrictive stance.

This marked the eighth straight time that the BOK has stood pat following rate freezes in February, April, May, July, August, October and November. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.

Yonhap