Korea's credit card loans jump 38% in 2010

Loans extended by South Korean credit card companies surged in 2010 as they beefed up cash lending to offset falling earnings from credit purchases.

Yonhap News Agency reported that the credit card companies lent a combined US$22 billion last year, up 38.3 percent from a year earlier, according to the Financial Services Commission.

The increase comes after the government lowered commission fees that credit card firms charge on their small- and mid-size merchants, a move that dealt a blow to profits from credit purchases.

The size of loans extended to card subscribers and the number of borrowers with low-credit have also increased, the FSC said, raising prospects that the recent trend is likely to lead to higher default rates.

In a bid to fend off such a risk, the financial watchdog said it plans to set up guidelines on card loan business and tighten inspections on risk management. The minimum requirement for loan reserves is also set to be raised during the first quarter of this year, the FSC added.

 "The FSC will make sure that the local card industry will not be affected by high insolvency. Strong actions will be taken on attempts to taint market orders," an FSC official said.