Korea to keep banks from inflating assets

South Korea's Financial Supervisory Service will restrain local banks' attempts to excessively inflate assets. This is part of banks' startegy to maintain their financial health.

"This year, banks are highly likely to pursue a growth drive in order to expand their sales capacity as the banking sector reshapes its landscape," said FSS Governor Kwon Hyouk-se.

Major Korean banks are accelerating lending and other sales competition as the industry is undergoing a major consolidation.

"The FSS needs to restrain banks' excessive growth competition in order to maintain the rate of banks' asset growth within the range of the economic growth rate," Kwon said.

Excessive external growth of banks raises fear that it could hurt their profitability, liquidity and asset quality, posing a risk to banks' management, the governor noted.

The FSS will tightly monitor the amount of lenders' loan issuances and their loan-to-deposit ratios, a barometer used to measure the level of banks' lending in comparison with deposit-taking.

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