The loan deposit rate for South Korea’s banking institutions fell to 95.3 percent at the end of March as the government takes steps to reduce household debt, the financial regulator said Monday.
The Financial Supervisory Service said all 15 local banks, including KB Kookmin Bank, Woori Bank, Shinhan Bank and Hana Bank, met the loan deposit ratio limit of less than 100 percent.
The limit that must be met by the end of next month is part of Seoul’s plan announced in June 2011 to control the country’s heavy household debt situation that could seriously undermine economic growth. Household debt currently hovers at around 1,000 trillion won ($857.6 billion).
The FSS said the average number fell 17.1 percentage points from Dec. 2009, and 2.5 percentage points compared to June of last year.
Among lenders checked, Busan Bank had the highest loan ratio at 97.8 percent, with HSBC having the lowest number at 84.6 percent.
The watchdog said the low numbers reflect moves by banks to use deposits received and withholding accounts to generate necessary funds instead of resorting to wholesale funding sources like bank bonds and certificate of deposits.
It added banks have refrained from competing to expand their size by loaning money and have moved to sell off bad debts.
The FSS said that it will strive to monitor and control loan deposit rates in the future but added every effort will be made to ensure funds can reach small and medium enterprises. (Yonhap News)
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