Several major South Korean banks have temporarily halted fresh household lending and some credit loans from this week in an effort to comply with government guidelines to contain household debt, bank officials said on Thursday. The move comes after the authorities unveiled in late June measures to tighten lending and avert a household debt crisis, with South Korean households among the highly indebted in industrialised nations.
Banking shares dropped 1.4 percent at 0142 GMT following the news, slightly underperforming the wider KOSPI index , which was down 1.2 percent. "We temporarily stopped some new home-backed securities loans through the end of this month and some kinds of credit loans until further notice," Shinhan Bank spokesman Lee Yoo-chul said by telephone. The authorities instructed all banks to keep monthly household lending growth at 0.6 percent or less, two other banking sources told Reuters.
Nonghyup and Hana Bank officials also confirmed similar moves. A Nonghyup official said they halted some types of household lending from Wednesday until the end of this month. Woori Bank spokesman Jang Chung-sik said the bank would apply tighter screening for household loans, rather than directly halting lending to households.
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