S. Korean banks warned against loan defaults

Loan delinquency rates have accelerated in Korea, making it imperative for lenders to better manage their loans.

Bank of Korea Governor Kim Choong-soo warned that inability to pay back loans can pose serious challenges for local lenders and the economy as a whole. The remarks came as household loan delinquency rates reached 0.89 percent at the end of April, from 0.78 percent in January. Total outstanding loans to households stood at 452.3 trillion won or US$388.2 billion in the cited month.

Numbers for all won-denominated loans, including money given to companies, reached 1.21 percent in April, up 0.12 percentage point from the previous month.

Foreign investment banks in Seoul said there is a need for the country to lower its household debt numbers, even if such the move entails hardship for some people.

They pointed out that the country had not taken steps following the 2008 global financial crisis to tackle this situation in an effective manner.

IBs said because the eurozone crisis may last 4-5 years, during which time global trade may be affected, there is a pressing need to systematically tackle the debt problem.

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