South Korean banks aim to contain growth in household lending this year to an “early 5 percent range,” a senior official at the financial regulatory agency said on Tuesday, below what authorities had earlier advised.
Lee Eun-tae, director general of the banking department at the Financial Supervisory Service, made the remarks during a scheduled meeting with bank officials.
South Korea adopted a relatively modest set of measures in June last year to prevent household debts from turning sour and pushing Asia’s fourth-largest economy into a fresh crisis.
Data late last year showed South Korean households carried debts of around 1.6 times their annual disposable income, one of the highest ratios among developed economies and exceeding that seen in the United States before the 2008 financial crisis.
South Korean regulators have told banks to contain annual household lending growth below nominal gross domestic product growth, and suggested 7.2 percent as a maximum late last year.
Household lending by banks and other deposit-taking financial institutions rose a net 8.7 percent by the end of September 2011 over a year earlier, after an 8.2 percent rise set in the whole of 2010, according to central bank data.
Finance minister Bahk Jae-wan told reporters on Monday the household debt burden had been stabilising and the debt structure improving since the government adopted measures to control it last year.
Bahk acknowledged that rising household borrowings from non-banking financial institutions were a source of concern but said financial market authorities were asking non-bank lenders to hold more reserve money.