South Korean banks to reduce lending in Q3: survey

Credit risk scores for the sectors are likely to record an increase, says the Bank of Korea.

South Korean lenders are expected to moderately reduce their mortgage and corporate lending in Q3, a survey by the Bank of Korea (BOK) revealed. This is even though demand for loans from these two sectors are expected to climb during the quarter.

BOK’s domestic bank lending index for Q3 for large corporations, SMEs, and household mortgage loans all came back at negative figures, indicating that lenders will tighten their standards for loaning in these sectors.

Credit risk scores for large companies and households also recorded increases, whilst risk scores of SMEs remained unchanged from Q2.

Credit risks in both corporations and households are expected to rise sharply, South Korea’s central bank noted in the survey conducted from 22 June to 8 July, featuring answers from 199 financial institutions.

Similarly, non-bank financial institutions except credit card companies are all expected to also tighten their lending standards.