Banks to Maintain Lax Approach to Granting Loans in Q3 Due to Relaxed Restrictions


SEOUL, July 19 (Yonhap) — Banks in South Korea are anticipated to keep a lenient attitude towards granting loans in the third quarter of the year in light of eased lending regulations, according to a survey conducted by the Bank of Korea (BOK).

The poll of financial institutions, including 18 banks, revealed that the index gauging banks’ attitude towards lending to households and businesses was 5 for the July-September period.

This figure is lower than the 6 recorded in the preceding quarter and 11 during the first quarter of the year.

A reading above zero implies that the number of lenders that will loosen lending surpasses those that plan to tighten lending criteria.

The BOK stated that banks have such an attitude towards lending as demand for household loans is expected to increase due to relaxed lending criteria.

Nevertheless, the survey warned that credit risks for borrowers in the third quarter may increase due to rising debt burden from elevated borrowing costs caused by the BOK’s rate hikes to curb inflation.

The index gauging credit risks for households and businesses rose to 36 in the third quarter of this year from the previous quarter’s 34.

Last week, South Korea’s central bank kept its key interest rate unchanged at 3.5 percent.

This marked the fourth consecutive time the BOK has stood pat following rate freezes in February, April and May. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.

This photo, taken July 18, 2023, shows signs on a bank's loan programs that were put up on the exterior of a lender in Seoul. (Yonhap)

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