September 21, 2020 11:21
Many Koreans are borrowing all the money while they can after financial authorities warned of tightened credit loan restrictions. Credit loans from commercial banks surged close to W900 billion over just a few days (US$1=W1,161).
The credit loan balance at KB Koomin, Shinhan, Hana, Woori and NH Nonghyup banks soared by W892.6 billion between Sept. 14 and 17 to W126.9 trillion. That boils down to a rise of W220 billion a day.
The panic was triggered by news that the Financial Supervisory Service on Sept. 14 called on commercial banks to "contain credit loans."
This led to fears that restrictions will get tougher and prompted many people to borrow money even though they have no immediate need of it.
The credit loan balance surged by W517.9 billion on the day of the announcement alone, compared to an average of W203.5 billion a day on average in August.
Commercial banks are preparing to tighten limits on loans by boosting interest rates, slashing the amount of money that can be borrowed and applying more stringent criteria for borrowers.
Internet-only bank K-Bank already raised the interest on credit loans by 0.1 percentage point and the interest rate on overdrafts by 0.2 percentage point on Friday.
A staffer at one commercial bank said, "We are carefully looking into the measure since it is difficult to reverse interest rates and borrowing limits once they are changed. Most banks are probably waiting to see what their rivals are doing."
Financial authorities are in a bind since jawboning has only triggered panic borrowing. One official at the financial watchdog said, "We are encouraging banks to take voluntary measures while strictly monitoring the steps they take."
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