The Korea Herald


Default rate of household loans rises in 2010

By 황장진

Published : March 8, 2011 - 18:27

    • Link copied

The delinquency rate of Korean financial companies‘ household loans gained in 2010 from a year earlier, a report showed Tuesday, adding concerns over worsening loan repayment ability.

The default rate stood at 1.09 percent of their total lending as of the end of 2010, up 0.06 percentage point from end-2009, the Financial Supervisory Service said in the report to the National Assembly.

Out of the total financial lenders, banks saw the ratio of their distressed household loans climb 0.19 percentage point on-year to reach 0.61 percent as of the end of 2010, according to the FSS report.

Banks’ total bad loan rate, which also includes corporate loans, inched up to 0.56 percent at end-2010, up 0.07 percentage point from a year ago, the data showed.

The corresponding household rate by credit lenders, including credit card firms, stood at 3.95 percent as of the end of last year, soaring 0.27 percentage point from a year earlier, the FSS noted.

The delinquency rate of distressed household loans by savings banks, meanwhile, dropped to 9.88 percent on-year from 12.64 percent as the government pumped in taxpayers‘ money to restructure the ailing savings bank sector reeling from surging loan defaults.

The bad loan rate on savings banks’ total lending also lost ground to 3.89 percent from 5.78 percent, the regulator noted.

Local financial companies had outstanding household loans of 694.7 trillion won ($621.3 billion) as of the end of 2010, with banking lenders holding 428.5 trillion won in household loans out of the total amount, according to the report.

The data came as the country is bracing for a jump in household loan defaults expected to follow the central bank‘s anticipated interest rate hikes.

The FSS governor has recently issued warnings to banks and credit card lenders over their excessive loan and credit extensions to households, citing growing concerns about households’ loan repayment ability. 

(Yonhap News)