S Korea eyes house­hold debt growth be­low 8.2%

Gov­ern­ment plans to curb ex­ces­sive lend­ing to meet its tar­get

Viet Nam News - - ASIA BUSINESS -

SEOUL — The gov­ern­ment plans to keep the growth rate of house­hold debt to be­low 8.2 per cent this year by tak­ing a set of steps to curb ex­ces­sive lend­ing, the na­tion’s top fi­nan­cial reg­u­la­tor said yes­ter­day.

Out­stand­ing house­hold debt stood at 1,450.9 tril­lion won (US$1.35 tril­lion) in the fourthquar­ter of last year, up 8.1 per cent from a year ear­lier, ac­cord­ing to the data by the Bank of Korea. It marked the slow­est pace since the first quar­ter of 2015.

Fi­nan­cial Ser­vices Com­mis­sion (FSC) Chair­man Choi Jongku told a meet­ing of rep­re­sen­ta­tives from the fi­nan­cial sec­tor that the growth of house­hold debt has been “sig­nif­i­cantly sta­bilised.”

The gov­ern­ment will “ac- tively en­cour­age” banks and other fi­nan­cial in­sti­tu­tions to keep the growth of house­hold debt to be­low 8.2 per cent this year by bet­ter man­ag­ing house­hold credit and min­imis­ing risks from rate hikes, Choi said.

Banks and other fi­nan­cial in­sti­tu­tions were also urged to strengthen their mon­i­tor­ing of house­hold lend­ing at a time when mar­ket in­ter­est rates are on the rise.

Al­though there is lit­tle risk that house­hold debt could spark a fi­nan­cial cri­sis here, in­debt­ed­ness is grow­ing faster than in­come, which may be chok­ing off pri­vate con­sump­tion.

Top-tier banks will soon im­ple­ment tougher guide­lines for mort­gage loans on a trial ba­sis.

Cur­rently, peo­ple’s re­pay­ment abil­ity for home mort­gages is cal­cu­lated on a ra­tio that mea­sures home mort­gage prin­ci­pal and in­ter­est pay­ments as a pro­por­tion of their an­nual in­come.

The stricter lend­ing rule for home mort­gages, named the Debt Ser­vice Ra­tio (DSR) by the fi­nan­cial au­thor­i­ties, will use a new ra­tio that mea­sures all debt prin­ci­pal and in­ter­est pay­ments as a pro­por­tion of an­nual in­come.

Fi­nan­cial au­thor­i­ties have said the DSR sys­tem will bet­ter as­sess a bor­rower’s re­pay­ment abil­ity and re­duce the risk of de­fault.

The head of the Fi­nan­cial Su­per­vi­sory Ser­vice (FSS) yes­ter­day called for sav­ings banks to curb high-in­ter­est loans, crit­i­cis­ing them for tak­ing a big­ger bite out of peo­ple with poor credit rat­ings.

Their av­er­age loan delin­quency ra­tio stood at 1.87 per cent as of the end of 2017, down 0.2 per­cent­age point from the pre­vi­ous year, it added.

Gover­nor Kim Ki-sik made the re­marks at a meet­ing with chief ex­ec­u­tives of sav­ings banks as he is fac­ing grow­ing calls to step down over rev­e­la­tions that three over­seas trips he made as a law­maker be­tween 2014 and 2015 were funded by fi­nan­cial and re­search in­sti­tu­tions under the over­sight of a Na­tional Assem­bly com­mit­tee, where he was a mem­ber.

The gov­ern­ment low­ered the max­i­mum le­gal lend­ing rate to 24 per cent per an­num in March, and some sav­ings banks have charged an about 20 per cent rate.

Kim ac­cused some sav­ings banks of charg­ing higher in­ter­est rates that are com­pa­ra­ble to pri­vate lend­ing firms al­though sav­ings banks can raise funds at lower bor­row­ing costs.

Sav­ings banks’ av­er­age loan­de­posit mar­gin is about 8 per cent, com­pared with some 2 per cent mar­gin by re­tail banks, Kim said.

Yes­ter­day meet­ing with heads of sav­ings banks was Kim’s third pub­lic ac­tiv­ity since rev­e­la­tions about his over­seas trips were re­ported.

Last week, Pres­i­dent Moon Jae-in said he will sack Kim if his con­tro­ver­sial over­seas trips are found to have been il­le­gal or sub­stan­tially be­low eth­i­cal stan­dards. — YON­HAP

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