S. Koreans' ability to repay debts improves in Q2

SEOUL, Sept. 14 (Yonhap) -- South Koreans' debt-repayment ability rose to a
more-than yearly high in the second quarter as a bullish stock market sharply
increased their financial assets despite a rise in personal debt levels, the
central bank said Monday.

The ratio of financial assets to debt held by individuals, which gauges their
capacity to redeem debts with assets, came in at 2.23 as of the end of June, up
from 2.16 three months earlier, according to the Bank of Korea (BOK). The
second-quarter figure marked the highest level since 2.26 seen in the first
quarter of 2008.
"Although home-backed lending increased, financial assets held by individuals
sharply rose due to rising share prices," Park Seung-hwan, head of the BOK's flow
of funds team, told a press conference.
As of end-June, financial assets held by individuals stood at 1,825.5 trillion
won (US$1.49 trillion), up 5.5 percent from three months earlier. Their debts
gained 2 percent on-quarter to 818.4 trillion won, the fastest growth since the
third quarter of last year, the BOK said.
Accordingly, net financial assets held by individuals, differences between
financial assets and debt, reached 1,007.1 trillion won, up 8.6 percent from the
previous quarter and marking the first time that they surpassed the
1,000-trillion won mark.
"The growth of individual debt quickened in the last quarter on rising mortgage
lending, but as home-backed lending rules were strengthened, their debt growth
may slow down the road," Park added.
South Korea's stock prices rose 15.2 percent in the April-June period mainly
because foreign investors' risk appetite revived amid hopes for an economic
recovery.
The financial regulator in early July toughened regulations on bank mortgage
lending by allowing lenders to extend such loans amounting to up to 50 percent of
the value of a residence in Seoul and its adjacent areas, down from 60 percent.
Last week, the watchdog further stiffened rules on home loans by prompting banks
to make loans based on borrowers' income.
Meanwhile, corporate debts inched up 0.7 percent on-quarter to 1,216.6 trillion
won as of the end of June, slowing from a 4.6 percent gain in the previous
quarter, the BOK added.
sooyeon@yna.co.kr
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