SEOUL, Jan. 3 (Xinhua) -- South Korean banks were expected to tighten their lending practices in the first quarter due to the predicted credit risk expansion amid the economic slowdown, central bank data showed Thursday.
Lending attitude index, which gauges local banks'lending practices over the next three months, stood at minus 2 for the January-March period, down from 2 in the previous quarter, according to the Bank of Korea (BOK).
The figure marked the lowest since minus 4 tallied in the fourth quarter of 2009. Local lenders replied that debt-servicing capabilities of both companies and households would weaken due to the persistent risk factors such as the eurozone fiscal crisis and the global economic downturn.
The index is based on a survey of 16 domestic banks conducted by the BOK between Dec. 10 and 24. A reading below zero means the number of banks, which will restrict their lending, outnumbered that of lenders that will ease them.
The sub-index for home-backed loans came in at 3 in the first quarter, unchanged from the previous quarter. Local banks will continue to expand fixed-rate residential mortgage loans, the ratio of which should be lifted to 30 percent of the total by the end of 2016.
The corresponding index for other household loans such as credit loans stood at minus 3 for the first quarter due to the expected weakening of debt-servicing capabilities by households.
The index for lending attitude towards small- and mid-sized enterprises (SMEs) retreated to minus 3 in the first quarter from zero three months earlier, with the corresponding index for large corporations declining from zero to minus 6 over the same period.
The central bank said that corporate credit risks would be heightened in the first quarter due to the persistent uncertainties at home abroad, saying that those risks will drive banks to tighten their corporate lending.
The credit risk index, which measures risks of borrowers' failure to service debts, increased to 31 in the three-month period through March from 30 three months before, according to the BOK.
The index for SMEs was unchanged at 34 in the first quarter, but the figure for large firms advanced from 9 in the fourth quarter to 13 in the first quarter.
The credit risk for households jumped to 34 in the first quarter, the highest since 2003 when the credit card crisis erupted. Debt-servicing capabilities of multiple borrowers, who borrowed money from several financial institutions, would worsen further amid the falling housing prices in the metropolitan area and the economic slump, the BOK noted.