Concerns about increased credit risk across households and businesses
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Financial institutions are expected to strengthen their loan review from the beginning of this year, as the internal and external economy is still uncertain due to the re-proliferation of the novel coronavirus infection (Corona 19), and as concerns over asset bubbles grow due to a surge in liquidity. There is also a prospect that the credit risk of households, mainly for vulnerable borrowers such as low-credit and low-income families, may increase.
According to the’Financial Institutions Loan Behavior Survey’ released by the Bank of Korea on the 13th, domestic banks’ lending attitudes in the first quarter of this year are expected to strengthen for SME loans and household and general loans. The lending attitude of domestic banks to SMEs by borrower was found to be -6 in the first and fourth quarters of this year from 3 in the fourth quarter of last year. If the loan behavior index is positive (+), it means lending attitude is eased, and negative (-) means the opposite.
The loan behavior index for general households is also expected to strengthen to -12 in the first quarter of this year. Although it has eased slightly from the fourth quarter of last year (-44), it is still negative. It is unlikely that it will be easy to obtain a loan for household housing as well as -6. Large companies recorded -3, maintaining the same level as in the fourth quarter of last year (-3).
Banks expected increased credit risk across businesses and households. The credit risk to the general household was 21, higher than in the fourth quarter of last year (15). Household housing also increased from 15 to 21. Large companies and SMEs maintained the level of the previous quarter at 12 and 29, respectively.
Non-bank financial institutions other than credit card companies are also planning to strengthen their lending attitude. The mutual savings bank’s lending attitude was -4, the mutual financial association -24, and the life insurance company -6. Credit risk is expected to increase in all sectors. In particular, the credit risk outlook for mutual savings banks was 25, a sharp increase from the fourth quarter of last year (11). Life insurance companies also showed a rapid increase from 7 to 23.
/ Reporter Jo Ji-won [email protected]
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