Korea’s household debt jumps to US$ 1.17 tril. with record Q4 borrowing

가계빚 사상 최대 1천344조원…1년새 141조 폭증

Koreans’ private borrowing breaks through yet another ceiling.
Kim Hye-sung looks into the key culprits that enabled the nation to reach a new record high in the fourth quarter of last year.
The Bank of Korea says the country’s total oustanding househould debt increased to more than 1.1 trillion dollars as of the end of 2016.
Commercial banks lent out far less in the fourth quarter than they did in the third — 11 billion dollars versus 15 billion,… bringing outstanding bank loans to around 540 billion.
But borrowing from non-bank entities increased… Those include savings banks, insurance and credit associations, which usually charge rates up to four times higher than commercial banks.
Households turned to these lenders in large part due to the government requiring banks to screen borrowers’ credit more strictly to get a grip on the nation’s debt situation.
Non-bank loans rose by 11 billion dollars for the fourth quarter, two billion dollars more than in the third quarter.

“Household debt in Korea has increased rapidly… with more people with low credit and low income turning to non-bank institutions to buy real estate as an investment. This is very worrying. The U.S. is expected to raise interest rates, which will increase the burden of these debts, hurting household income, damaging the cycle of consumption and, in the long run, the whole real economy.”

According to the Bank for International Settlements, household debt can hurt a country’s economic growth when its ratio to GDP surpasses 85%.
Among 20 emerging markets, Korea has the highest household debt-to-GDP ratio of ninty percent, raising concerns about its economic vitatility and the long-term sustainability of growth.

To contain ballooning household debt, Korea’s financial authorities said Tuesday they will introduce measures to tighten credit lending from non-bank institutions.
Kim Hyesung, Arirang News.

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