Korean banks expected to tighten grip on loans

Korea's banks are likely to be more cautious about extending loans due to increased economic uncertainty at home and abroad.

This is partly due to eurozone debt crisis, which is increasing economic uncertainty, according the central bank.

An index gauging lending attitudes reached three for the July-September period, compared with seven tallied inthe second quarter, according to a survey of 16 local banks conducted by the Bank of Korea.

The third-quarter data marked the lowest level since the index came in at minus four in the fourth quarter of2009, it added.

Local banks expect credit risks of households and companies to rise further in the third quarter on concerns that weak domestic demand will hurt smaller firms’ profitability and household debt is on the rise, the BOK said.

An index measuring their credit risks, or the likelihood of borrowers being unable to repay debt, came in at 38for the current quarter, up from 24 recorded three months earlier.

The figure marked the highest level since the index reached an identical 38 in the first quarter of 2009 whenthe country was in the midst of the global financial crisis, it added.

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