S. Korean banks to tighten loan standard to reduce debts



South Korean banks will tighten loan standard in the third quarter amid the government's efforts to reduce household debts and stabilize the real estate market, a central bank survey showed Thursday.

The lending attitude index of commercial banks stood at minus 14 in the July-September quarter, down three points from the previous quarter, according to the Bank of Korea (BOK).

The index below zero indicated more banks would tighten loan standard in the cited quarter than banks easing the standard.

It was based on a survey of a total of 199 financial institutions, including banks, savings banks, credit card issuers and life insurers, conducted from May 29 to June 15.

The new government under President Moon Jae-in, who took office on May 10, announced measures to tighten the mortgage financing as household debts maintained a record-breaking momentum amid the record-low interest rate and the eased regulations on home-backed loans.

The country's central bank kept its policy rate on hold at an all-time low of 1.25 percent since June last year, but it recently indicated a rate hike following the U.S. interest rate increase to a range of 1.00-1.25 percent.

The lending attitude index for home-backed loans tumbled to minus 23 in the third quarter from minus 10 in the prior quarter.

Amid growing expectations for the central bank's rate hike, worries emerged that households would face heavier debt-serving burden.