South Korean Banks Brace for Stricter Lending Standards
The Bank of Korea (BOK)'s lending attitude index slid to minus 4 in the April-June quarter, deteriorating from minus 1 recorded in the preceding three-month period, according to a BOK survey of 203 banks and financial institutions conducted between Feb. 27 and March 13.
The index has remained in negative territory since the second quarter of 2025, a sustained reading that underscores a persistent tilt among lenders toward tightening credit access rather than loosening it.
The squeeze is most acutely felt in the mortgage segment. The index tracking home loans to households fell further — from minus 6 in the first quarter to minus 8 in the second — reflecting intensifying regulatory pressure following government measures specifically targeting runaway mortgage borrowing. Other household loan categories, such as credit loans, however, showed a relative easing, with the index recovering from minus 8 to minus 3.
Corporate borrowers were not spared from the tightening trend. The lending index for large companies tumbled sharply from 11 to 3 over the same period, while the reading for small firms slipped from 3 to zero — signaling a broad-based withdrawal of credit flexibility across South Korea's business landscape.
The BOK opted to hold its benchmark interest rate steady at 2.50 percent, following back-to-back cuts of 25 basis points each in February and May 2025, as policymakers weigh the delicate balance between stimulating growth and containing financial system risk.
On the credit risk front, the household risk index held flat at 19 in the second quarter. Corporate risk indicators, however, trended upward — the index for large companies climbed from 19 to 25, while the figure for smaller firms edged higher from 33 to 36 — raising fresh concerns over the resilience of South Korea's private sector amid tightening financial conditions.
Legal Disclaimer:
MENAFN provides the
information “as is” without warranty of any kind. We do not accept
any responsibility or liability for the accuracy, content, images,
videos, licenses, completeness, legality, or reliability of the information
contained in this article. If you have any complaints or copyright
issues related to this article, kindly contact the provider above.
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
