Watchdog to beef up monitoring of home loans

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SEOUL, Feb. 18 (Yonhap) -- The government plans to closely monitor the growth of
home-backed loans, aiming to prevent a spike in such loans from weighing on the
economy, the state financial watchdog said Thursday.
"The regulator plans to keep close tabs on the growth of household loans in order
to prevent it from becoming a downside risk to the economy and will preemptively
take actions (if necessary)," the Financial Services Commission (FSC) said in a
report to the National Assembly.
A set of regulatory controls on mortgage lending helped ease the growth of such
loans and banks' financial health remains relatively sound, but a potential rate
hike by the central bank could dent household ability to repay debt.
In July and September 2009, the financial watchdog toughened regulations on
mortgage loans due to concerns that a surge in home-backed loans could result in
ballooning housing prices.
The Financial Supervisory Service said in a separate report that there is a need
to curb excessive asset expansion of banks by strengthening the loan-deposit
ratio, a gauge of a bank's solvency. Tougher rules on banks' loan-deposit ratios
are being pushed in an effort to adjust the pace of home loan growth.
"The government also plans to support low-income families in a bid to ease debt
repayment burdens," the FSC added.
Also Thursday, the FSC said South Korea plans to sell its stakes in four
bailed-out firms, including Hynix Semiconductor Inc., that were rescued during
the 1997-98 economic meltdown.
"While taking into account merger and acquisition markets and economic
situations, the government plans to first unload its stakes in four out of 12
bailed-out companies," it added.
The companies include Daewoo International Corp., Daewoo Electronics Corp.,
Daewoo Shipbuilding & Marine Engineering Co. and Hynix Semiconductor.
Creditors of Hynix failed on Friday to draw bidders for a 28.07 percent stake of
the world's second largest chipmaker, even after extending the deadline twice,
raising the chance of a block trade.
The planned stake sale also comes amid a government attempt to privatize Woori
Finance Holdings Co., the country's No. 2 financial services company, and Korea
Development Bank.
The FSC said the government plans to decide how to sell Woori Finance within the
first half. The regulator said the government is open to various options to sell
a 50 percent stake plus one share in Woori, but market watchers speculated that a
merger with another financial company is highly likely, given the size of a deal.
sooyeon@yna.co.kr
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