By Kang Seung-woo
Outstanding household loans from 18 banks have been gaining at a quicker pace over the past four months of 2011 from a year ago due to increased home-backed loans, the financial watchdog said Thursday.
According to the latest data from the Financial Supervisory Service (FSS), bank lending to households increased by 6.3 trillion won ($5.72 billion) in the January-to-April period from the end of 2010. For the same period a year ago it amounted to 2.4 trillion won.
At the end of April, banks’ household lending reached 433.9 trillion won. Last year’s figure was 429.5 trillion won. The increasing loans came one day after the Bank of Korea (BOK) had announced Korea’s household debt stood at 801.4 trillion won as the end of March this year.
The FSS pointed out that the rising lending by commercial banks is due to an expansion in home-backed loans.
Banks’ home-backed lending, which accounts for a majority of banks’ loans, grew by 5.4 trillion won quarter-on-quarter to 289.9 trillion won in the first quarter. In addition, the financial watchdog has conducted a regular inspection of large financial groups and their bank units to curb their aggressive lending competition.
“Recently, banks’ lending to households has picked up speed, so it may go sour in the future. We plan to carry out inspections of banks to keep them on track,” said an FSS official.
Meanwhile, the FSS added that the 15 local banks’ average loan-to-deposit ratio registered 96.5 percent at the end of March, down from 98.2 percent three months earlier.
The loan-to-deposit ratio, the measurement of a lender’s solvency, is the percentage of a bank‘s loans against its deposits. The higher the ratio, the more the bank depends on borrowed funds.
Since late 2009, the FSC has required banks to keep the ratio below 100 percent.