S.Korean banks reluctant to lend households

South Korean banks are reluctant to lend households in the second quarter due to their weaker capability to repay debts.

Lending attitude index, which gauges local banks' lending practices over the next three months, stood at 3 during the April-June period, down from 7 tallied three months earlier, according to the Bank of Korea. The index is based on a survey of 16 domestic banks conducted by the BOK between March 12 and March 23.

The fall was mainly attributed to domestic lenders' reluctance to widen their lending to households amid weaker debt service capabilities of households and the government's efforts to constrain further growth of household debts.

The country's household credit, including loans from banks and non-bank financial institutions as well as credit purchases, reached 912.9 trillion won or US$809.24 billion as of the end of 2011, up around 700 trillion won from 12 years earlier. The annual growth rate of household debts came to 12.9 percent on average between 1999 and 2011, much higher than the nominal GDP growth of 7.1 percent over the cited period.

Local lenders were expected to tighten their grip on lending to small- and mid-sized enterprises  due to the need for
stronger risk management amid higher credit risks caused by economic slowdown at home and abroad.

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