By Nam Hyun-woo
Despite the financial authorities’ efforts to rein in Korea’s snowballing household debt, the amount of bank loans to households last month increased by more than 6 trillion won from a month earlier, central bank data showed Wednesday.
According to the Bank of Korea (BOK), household loans by 16 banks in Korea stood at 688.4 trillion won ($613.6 billion) at the end of last month, up 6.1 trillion won from August.
The increase in September was smaller than that of August, which was 8.6 trillion won. September has long been showing smaller loan demands because of incentives amid the Chuseok holiday.
The increased amount of loans in September is fourfold greater than the average for the month from 2010 to 2014, which was 1.6 trillion won.
With Korea’s household debt standing at an all time high of 1,257 trillion won at the end of the second quarter, domestic banks were already close to reaching their 2016 household lending target.
Six major banks saw a 36 trillion won increase in their household loan balance during the first nine months of the year. The country’s 16 banks have set their combined loan balance increase target this year at 37.3 trillion won.
Of concern is this month’s tally. The BOK and other analysts say that many Koreans move house in October traditionally, which drives an increase in loans.
With gloomy anticipation, financial authorities have urged banks to slow their efforts to extend more lending.
In a news conference earlier this month, Financial Services Commission Chairman Yim Jong-yong said that “banks showing excessively fast increases in household loans will be subject to a special inspection by the Financial Supervisory Service.”
This move is to pressure local banks, which say they are slowing their loans in October. However, some banks say they are faced with a dilemma as they cannot turn a blind eye to demand.
KB Kookmin Bank said that its household loan balance had decreased by 85.5 billion won as of Tuesday from the end of September. The Industrial Bank of Korea also said its household loan balance decreased by approximately 60 billion won as of Monday from the end of September.
Woori Bank said it saw a 10 billion won increase this month, but noted that its household loan balance has decreased in the past several months.
“Though data compiled during the month can be interpreted differently, there are clear signs that household loan balances the banks are carrying are shrinking,” said an official asking not to be named. “However, banks are also stuck in the middle because they cannot say no to customers who request loans.”