Banks expected to pause in toughening household loan controls in Q1: survey

Banks in South Korea are expected to take a wait-and-see attitude in their lending policy during the first quarter after significantly toughening loan controls for months in line with the government's push to rein in household debt.

According to the poll of 17 banks and other financial institutions by the Bank of Korea, the index measuring the banks' attitude toward home-backed and unsecured loans came to zero and minus six, respectively, for the January-March period.

The figures were higher than minus 35 and minus 41 tallied in the fourth quarter of last year.

The lower the reading, the more likely banks will tighten their restrictions on lending.

A reading below zero still means the number of lenders that will restrict lending surpasses that of banks planning to ease lending criteria.

A BOK official said banks are expected to maintain a "wait-and-see" attitude after they toughened loan controls on households in the previous two quarters in tandem with the government's fight to keep household debt under control.

Household debt has emerged as a potential risk factor for the country's economy, as borrowing surged buoyed by historically low interest rates and rising home prices.

Financial regulators unveiled back-to-back measures last year to slow household debt growth.

The central bank has also tightened its monetary policy by raising its key policy rate three times since August last year, including last week's 0.25 percentage point rise. (Yonhap)