Banks see high credit risks for households in Q2

South Korean banks forecast the credit risks of households to stay high in the second quarter on concerns over excessive household debt, the central bank said Thursday.

An index gauging larger firms' credit risks came in at 25 for the April-June period, unchanged from the previous quarter, according to a survey of 16 local banks conducted by the Bank of Korea. The number marked the highest level since 28 tallied for the first quarter of last year.

Credit risks refer to the likelihood of borrowers being unable to repay debt. A reading above zero means that the degree of credit risks is high.

"Low-income families and fragile self-employed are feared to see their debt-servicing capacity worsen due to high household debt against income and delay in improvement of income conditions," the central bank said in a statement.

An index measuring small and medium enterprises' credit risks came in at 25 in the second quarter, down from 28 recorded for the January-March period, it added.

An index on lending attitudes toward larger companies came in at minus 9 for the second quarter, unchanged from the previous quarter, an indication that local banks are likely to keep their tight stance.

The lower the reading, the likelier banks will tighten their restrictions on lending. A reading below zero means that the number of lenders that will ease lending criteria falls short of that of banks planning to restrict lending. (Yonhap)