{"id":2201748,"date":"2023-07-20T08:00:16","date_gmt":"2023-07-19T23:00:16","guid":{"rendered":"https:\/\/koreapro.org\/?p=2201748"},"modified":"2023-07-19T16:48:02","modified_gmt":"2023-07-19T07:48:02","slug":"south-korean-banks-to-maintain-lenient-loan-policies-amid-relaxed-restrictions","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/07\/south-korean-banks-to-maintain-lenient-loan-policies-amid-relaxed-restrictions\/","title":{"rendered":"South Korean banks to maintain lenient loan policies amid relaxed restrictions"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">A recent <\/span><a href=\"https:\/\/www.bok.or.kr\/portal\/bbs\/P0000559\/view.do?nttId=10078429&amp;menuNo=200690\"><span style=\"font-weight: 400;\">survey<\/span><\/a><span style=\"font-weight: 400;\"> by the Bank of Korea (BOK) indicates that domestic banks in South Korea will continue to exhibit a lenient approach toward extending loans to small and medium-sized enterprises (SMEs) and households in the third quarter of the year due to relaxed lending restrictions. However, banks are projected to adopt a more stringent stance when dealing with large corporations. On the other hand, non-banking financial institutions are expected to demonstrate a hardened attitude toward most business sectors, with credit card companies being the notable exception.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, the survey highlights a potential increase in credit risks for SMEs in the third quarter due to a decline in some vulnerable industries and small business operators\u2019 repayment capacity due to the BOK\u2019s rate hikes to control inflation. Concerns over the cessation of COVID-19 financial support in September also contribute to this anticipated risk elevation. Simultaneously, household credit risk is also expected to experience an uptick compared to the previous quarter. Despite these risks, the BOK has kept its key interest rate unchanged at 3.5%, marking the fourth consecutive rate freeze after seven consecutive rate hikes from April 2022 to Jan. 2023.<\/span><\/p>\n<p><b>Why It Matters<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The lenient approach of South Korean banks toward lending to SMEs and households can be both advantageous and disadvantageous. On the positive side, this approach can stimulate economic growth and recovery, particularly in the context of the country\u2019s revised growth forecast of <\/span><a href=\"https:\/\/en.yna.co.kr\/view\/AEN20230703005051320\"><span style=\"font-weight: 400;\">1.4%<\/span><\/a><span style=\"font-weight: 400;\">. By providing easier access to credit, SMEs and households could drive consumer spending and economic activity, contributing to a much-needed boost in the country\u2019s economy. Additionally, with the rebound in property prices across Seoul, lenient lending could help more people access housing.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, this lenient lending approach carries substantial risks. Given the country\u2019s slower-than-expected economic performance, borrowers might find it difficult to repay loans, which could increase bad debt in banks\u2019 portfolios. This risk is especially relevant in light of the increasing credit risk anticipated due to BOK\u2019s previous rate hikes and the end of COVID-19 financial support. The rise in borrowing costs, particularly for households with mortgages, could lead to higher default rates.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Maintaining a stringent stance towards large corporations could lead to better credit risk management. Large corporations usually have more robust financial structures and are better equipped to withstand higher borrowing costs than SMEs and households. However, considering the recent heavy rainfall and flooding that caused <\/span><a href=\"https:\/\/en.yna.co.kr\/view\/AEN20230717002153315?section=search\"><span style=\"font-weight: 400;\">significant damage<\/span><\/a><span style=\"font-weight: 400;\">, recovery and reconstruction could necessitate a more flexible approach toward lending to large corporations, particularly those involved in infrastructure and reconstruction efforts.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>A recent survey by the Bank of Korea (BOK) indicates that domestic banks in South Korea will continue to exhibit a lenient approach toward extending loans to small and medium-sized enterprises (SMEs) and households in the third quarter of the year due to relaxed lending restrictions. However, banks are projected to adopt a more stringent [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2201749,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24],"class_list":["post-2201748","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korean banks to maintain lenient loan policies amid relaxed restrictions - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2023\/07\/south-korean-banks-to-maintain-lenient-loan-policies-amid-relaxed-restrictions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korean banks to maintain lenient loan policies amid relaxed restrictions - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"A recent survey by the Bank of Korea (BOK) indicates that domestic banks in South Korea will continue to exhibit a lenient approach toward extending loans to small and medium-sized enterprises (SMEs) and households in the third quarter of the year due to relaxed lending restrictions. 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