Savings banks' unsecured household loans jump in 2010

SEOUL, March 31 (Yonhap) -- South Korean savings banks' unsecured household loans surged 44 percent in 2010 from a year earlier, the financial regulator said Thursday, adding to concerns over swelling household debts.
Local savings banks' unsecured loans to households reached an outstanding 4.6 trillion won (US$4.2 billion) as of the end of 2010, compared with 3.2 trillion won at the end of 2009, according to the Financial Supervisory Service (FSS).
The unsecured loans increased in the first month of this year, reaching 4.9 trillion won as of the end of January, the FSS noted.
Unsecured loans accounted for 7.6 percent of local savings banks' total lending at end-January, compared with 7.1 percent a month earlier and 5 percent at the end of 2009, the regulator said.
The recent growth of unsecured household loans, which are usually issued to borrowers with low creditworthiness, came largely because savings banks shifted focus to household borrowers away from loss-making project financing (PF) loans, an FSS official said.
The FSS said it plans to launch spot inspections of savings banks if the loan growth further accelerates.
A recent surge in soured PF loans led to the suspensions of eight savings banks this year by the Financial Services Commission (FSC).
In a bid to revamp the ailing sector, the FSC, South Korea's top financial rule maker, released in mid-March a package of new rules to limit savings banks' risky assets and boost responsibilities of major savings bank shareholders.
The household loan growth data also fuels concerns over the country's fast-growing household debts, which are cited as a major risk factor to the economy.