In Q1 This Year, Obtaining General Household Loans Expected to Become More Difficult

Bank of Korea Announces 'Financial Institution Lending Behavior Survey Results'

Lending Attitudes Toward Small and Medium Enterprises Expected to Ease

[Asia Economy Reporter Shim Nayoung] In the first quarter of this year, domestic banks' lending attitudes toward small and medium enterprises (SMEs) are expected to ease, while for households, lending attitudes are anticipated to slightly tighten, mainly for general loans. Credit risk is expected to increase for both corporations and households. Loan demand is projected to rise for corporate and household general loans but decrease for household housing-related loans.

On the 21st, the Bank of Korea announced the 'Financial Institution Lending Behavior Survey Results (Q4 2019 Trends and Q1 2020 Outlook)'. Lending attitudes toward households are expected to remain unchanged for housing-related loans, but general loans are likely to be somewhat tightened considering credit soundness management and debt repayment capacity.

On the other hand, lending attitudes toward SMEs are expected to ease, centered on interest rate spreads, as competition among financial institutions for high-quality SMEs intensifies due to the government's policy to strengthen innovative financial support.

Domestic banks anticipate that credit risk for large corporations and SMEs, especially in vulnerable industries, will increase in the first quarter of this year amid heightened uncertainty in domestic and external economic conditions. In particular, SMEs are expected to face increased caution regarding credit risk due to poor performance and deteriorating profitability of export companies.

Household credit risk is also expected to rise, mainly among vulnerable borrowers such as low-credit and low-income groups.

During the first quarter, loan demand is expected to increase due to continued working capital needs of SMEs and the easing of banks' lending standards, including a reduction in loan interest rate spreads. Large corporations are also projected to see a slight increase in loan demand, mainly for working capital. Household loan demand is expected to see a decrease in housing-related loans due to the housing market stabilization measures announced on December 16 last year, while general loans are anticipated to increase slightly.

For non-bank financial institutions, lending attitudes in the first quarter of 2020 are expected to vary by sector: mutual savings banks are likely to tighten lending attitudes, whereas credit card companies are expected to ease them. Credit risk is forecasted to decrease for credit card companies but increase for other sectors. Loan demand is expected to rise for credit card companies, while other sectors are projected to maintain levels similar to the previous quarter.

This content was produced with the assistance of AI translation services.