Korea July household debt delinquency ratio climbs
September 02 2011
Source : Intellasia
The delinquency ratio of South Korea's household debt held by domestic banks rose to the highest this year, data showed on Thursday, a further blow to policymakers struggling to tackle the country's high levels of household debt.
The ratio of household borrowings with principal payments overdue for more than a day climbed to a provisional 0.77 percent at the end of July, versus 0.72 percent a month earlier, the regulatory Financial Supervisory Service (FSS) said in a statement.
The July reading was the highest for this year, while no comparative figures for last year and preceding years were immediately available, the FSS said.
Under international criteria that classify as delinquent loans for which the principal payment is overdue for more than a month, the ratio for South Korea's household debt stood at 0.73 percent in July, the FSS added.
As household borrowing has propped up consumer spending in Asia's fourth-largest economy, any bursting of the lending bubble is the biggest economic risk facing South Korea and one that the government may be loath to tackle ahead of elections next year.
With soaring inflation and global market volatility raising concerns about the repayment ability of indebted households, speculation is mounting that the government might cut the loan-to-deposit ratio at banks from 100 percent to clamp down on fresh lending.
The FSS said in a statement late on Tuesday that it had yet to look into slashing the loan-to-deposit ratio.
Several South Korean banks have temporarily halted fresh household lending or tightened loan screening from this month, in what they said was a response to a request from the government.