Photo courtesy of Yohan Cho.

Sound underwriting shields South Korean banks’ from housing market downturn: Fitch

Unsecured personal loans and small business loans are bigger risks.

South Korean banks’ sound underwriting will provide much needed buffers as the local housing market’s downturn is likely to sustain over the next several years, reports Fitch Ratings.

The rapid monetary tightening has weighed heavily on the local housing market, the ratings agency said.

“Fitch expects the current downturn to last until housing affordability is improved materially by a combination of lower prices, cheaper credit access, and a significant rise in income—a confluence of factors we believe is unlikely over the near term,” Fitch Ratings wrote in a report, “Korean Banks to Weather Housing Market Downturn.”

“We believe that banks’ sound underwriting provides asset-quality buffers to withstand a moderate house-price correction,” it added.

ALSO READ: South Korea’s bank loans fall by $834m in September: report

Prudential measures that are still tight—such as the broadened application of a 40% cap on the debt-service-ratio and persistent lending restrictions on multiple property owners—should support banks in maintaining a sound risk profile.

“We see greater risks on unsecured personal loans that led the overall household loan growth in 2017-2020, and small business loans,” Fitch said.

In comparison, the volume of household loans delinquent by over a month remains low, at only 0.21% of the banking system in August 2022.

The degree of increase in delinquent loans is expected to be moderate, due to the slowing economy, rising interest rates, and housing market downturn in the absence of a severe economic shock.

Follow the links for more news on

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!


Bank DBS Indonesia avails fast, reliable and sustainable corporate banking
Its ESG-based bank financing, as reflected in sales and asset under management, proves to be an IDR1.8t (US$117m) success.
Italy brings its strong suits to Singapore’s fintech expo
Italian trade executive says 9 firms at the Singapore Fintech Festival 2023 exemplify the diverse range of products and expertise Italy can bring to the table.
Digibank by DBS sets new digital banking standards
Apart from speed and convenience, DBS stays ahead with exceptional personalisation, open banking, and enhanced security.