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FSS to restrain savings banks’ household loans

[THE INVESTOR] The Financial Supervisory Service is seeking measures to restrain savings banks’ lending to households to tackle the nation‘s soaring household debt, officials said on Oct. 18.

Savings banks’ loans to the household sector have been rising at a rapid clip since last year due to their aggressive marketing activities for borrowers with poor credit in South Korea already gripped by high household indebtedness.

According to the officials, the watchdog is considering toughening rules on the financial soundness of savings banks by having them put aside more reserves for risky assets and strengthening regulations on overdue loans.

“With savings banks’ credit loans to households rising fast, financial authorities are keeping close tabs on the situation and mulling tightening prudential supervision to prepare for the worsening of their financial health,” a source said.

Tougher prudential regulation requires savings banks to conduct loan screenings more thoroughly, which usually helps limit the pace of lending.

Since July, the FSS has also been conducting on-spot inspections of 14 savings banks with high portions of credit loans to households over their lending rate calculations and business practices of hiring loan brokers.

The outcome of the inspections is widely expected to have an impact on prudential supervision rules and regulation on savings banks’ lending practices.

Korea Herald daum