Household credit risk rising: BOK

Amid continued disputes over a possible property bubble burst, commercial lenders expect the credit risk for Korean households to be higher in the coming months, the central bank`s latest figures showed.

An index measuring credit risk for households came in at 22 in the third quarter. The index, calculated based on the Bank of Korea`s survey for 16 banks, continued to rise since the fourth quarter of last year when it marked zero. A positive index means more respondents expect the credit risk will be higher in the next three months.

The credit risk has been deteriorating because of lukewarm transactions in the housing market and concerns about a possible drop in apartment prices, which many banks hold as collateral.

In recent weeks, the financial regulator has pledged to curb fresh mortgage loans by adopting more prudent lending criteria. The survey results suggest that local lenders will take more conservative approach in extending lending to households in the coming months, industry analysts say.

Credit risk for smaller enterprises and big business groups is also expected to rise as external risk factors could hamper corporate profitability.

Other BOK data also showed that short-term capital combining cash, demand deposits and financial products due six months or less is estimated to reach as much as 523.4 trillion won ($561.9 billion) as of May. It accounts for 30 percent of the total aggregate liquidity.

Floating funds, which account for a chunk of short-term liquidity, rise when retail investors and companies have a hard time finding the right place to put their money. A rise in short-term liquidity, however, doesn`t necessarily mean a whopping increase in floating funds as it also includes operating capital by local companies.

Amid low interest rates, a sharp increase in floating funds is not desirable as this would make it difficult to channel sufficient capital into the industrial sector, analysts say. Korean economic policymakers, in particular, are worried that part of the funds could be invested in the property market, fueling a fresh round of price increases.

(jungmin@heraldm.com)











By Kim Jung-min