S. Korea`s non-bank loans jump on ‘balloon effect’

2017.06.19 17:21:34 | 2017.06.19 17:22:15
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Loans extended by South Korea`s non-bank lenders surged more than 37 trillion won ($32.6 billion) in the first four months of this year on a so-called "balloon effect" in which consumers shifted to high-rate loans amid stricter rules on bank loans, central bank data showed on Sunday.

Outstanding loans extended by non-bank lenders came to 762.29 trillion won as of end-April, up 5.2 percent from the end of last year. It marks the highest amount since the central bank began compiling such data in 1993. They add more danger to the colossal household debt as the high-costing debt could burden households on higher interest rates.

Non-bank lenders include mutual savings banks, credit unions and insurance companies.. The pace of growth is more worrisome. Their loans to households in the first four months were bigger by more than 7 trillion won from a year ago.

If this current trend continues, it would break a previous growth record of 87.76 trillion won tallied last year.

Such an increase apparently followed what is called a balloon effect created by stricter standards on bank loans. The Korean government increasingly tightened its regulations on bank lending after the country`s household debt reached record highs.

By Jeon Jung-hong, Chung Seok-woo and Noh Seung-hwan

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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