S Korean financial firms to tighten loan rules

SEOUL, Oct 08 (Xinhua): South Korean financial companies planned to tighten loan-related rules for households in the fourth quarter of this year as the government unveiled measures to control speculative investment in the real estate market, central bank survey showed on Monday.

The lending attitude index for local banks, which gauges the willingness to offer loans, came in at minus 30 in the October-December quarter, down 7.0 points from the previous quarter, according to the Bank of Korea (BOK).

The result was based on a BOK poll of 199 financial firms, including banks, savings banks, credit issuers, credit union and life insurers, conducted from Aug 24 to Sept 07.

The government of President Moon Jae-in, who took office in May last year, rolled out a set of measures to control speculative investment in the property market as households rushed to purchase new homes with borrowed money amid the near-record-low borrowing costs.

The BOK refrained from altering its policy rate since the bank raised it to the current 1.50 per cent in November last year from an all-time low of 1.25 per cent, leading to the record-breaking household debts.

The US Federal Reserve lifted its target rate to a range of 2.00-2.25 per cent, far surpassing the South Korea's policy rate.

Credit risk index for households jumped 7 points from three months earlier to 27 in the fourth quarter.

If the BOK starts tightening its monetary policy rapidly to follow the suit of the US central bank, credit risk for the household debts could pick up fast.