KB Kookmin Bank may suspend consumer loans as it nears loan cap

South Korea’s largest commercial lender KB Kookmin Bank mulls suspending consumer loans as it nears rigid state-set loan cap to contain unfazed growth in household debt.

KB Kookmin Bank is studying the extreme measure as it finds the growth in consumer loan “grave.”

As of last week, the bank’s outstanding balance of household loans stretched to 168.8 trillion won ($143.5 billion), up 4.31 percent from the end of last year.

The rise is still below the 5 to 6 percent cap versus last year-end mandated by the financial authority, but may soon reach the threshold, given the accelerated rise after NH Nonghyup and other major banks begun to roll back or suspend loans under state order.

Household loan gained 0.53 percentage point in two weeks to record 4.15 percent as of Sept. 17. The figure shot up to 4.31 percent last Thursday.

The sharp rise in household loans stems from the jump in jeonse price. Jeonse is a unique Korean long-term lease contract where the tenant places a large lump-sum deposit, about 50-60 percent of the property’s value, for the contract period in advance. KB Kookmin Bank said its household lending for jeonse has soared 18.8 percent recently while home mortgage lending grew 4.03 percent.

The bank will first lower the cap on household loan from this week to slow the growth and may suspend consumer loan altogether if the rise does not subside.

Hana Bank, also one of the country’s five major private lenders, will suspend sales of some of its household loans including mortgage guarantee from next month due to the fast rise of its household loans.

NH Nonghyup Bank already has halted providing mortgage services for house purchase and jeonse since late August, with such suspension planned to last until Nov. 30.

The growth rate of household loans at the country’s top five banks reached 4.69 percent, as of Sept. 16. NH Nonghyup Bank recorded 7.4 percent and Hana Bank 5.04 percent.

The financial authority maintains it will not ease the cap to curtail household debt that reached a fresh peak of 1,805.9 trillion won as of June.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]