FSS chief Lee Bok-hyun speaks during a meeting with financial leaders in Seoul on Tuesday. (Yonhap)
A leading financial regulator on Friday called on South Korea’s savings banks to step up efforts to keep their asset management in good shape amid the growing possibility that their debt holdings could deteriorate amid rising interest rates. rapidly rising interest.
Lee Bok-hyun, the head of the Financial Supervision Service (FSS), made the remarks during a meeting with CEOs of major savings banks in Seoul, the latest in a series of meetings he has held. with financial leaders since taking office last month.
“When the coronavirus-related financial support ends and interest rates rise at full speed, borrowers’ ability to repay is expected to deteriorate,” Lee said at the meeting.
“There is a need to better manage lending to multiple borrowing households,” he added. “Credit assessment and follow-up management of loans to multiple borrowers should be intensified and loan loss reserves should also be set aside preemptively to prepare for the possibility that such loans go wrong. “
Still, he stressed the importance for savings banks to play their role of granting loans to people who are very vulnerable to economic fluctuations as they have done to help them in the throes of the pandemic.
Friday’s meeting came after Lee had met with senior officials from various financial sectors, including banks and credit card companies, since taking office last month amid fears the rise rapid interest rates and a possible economic recession would affect the financial system.
Banks have been raising lending rates at a rapid pace recently, in line with moves by the Bank of Korea (BOK) to aggressively raise its key rate to rein in soaring inflation.
There are fears that rising borrowing costs could increase the financial burden on many households, which had taken out loans to buy homes or deal with the fallout from the pandemic.
According to the latest BOK data, household debt stood at 1.859.4 trillion won ($1.44 trillion) at the end of March, up 5.4 percent from a year earlier. (Yonhap)