Borrowing in S Korea

In Bloomberg today:


South Korea's Household Debt Grows at Fastest Pace in 5 Months

By Kim Kyoungwha

Aug. 8 (Bloomberg) -- South Korea's household debt grew at the fastest pace in five months in July, increasing pressure on the central bank to raise interest rates for a second time this year.

Lending by commercial banks to households surged 1.77 trillion won ($1.9 billion) from the previous month, the biggest rise since February, the Bank of Korea said in Seoul today. The gain was more than double a 776 billion won increase in June.

A resurgence in household borrowing may persuade central bank Governor Lee Seong Tae and his board to increase the benchmark interest rate from a six-year high. Policy makers raised the key rate to 4.75 percent last month on concern a jump in lending may spur inflation as economic growth accelerates.

Lee and his policy makers meet at 9 a.m. in Seoul tomorrow and an interest-rate decision is due before 11 a.m.

All 14 economists surveyed by Bloomberg News expect the bank will leave the rate at 4.75 percent. Still, nine of 14 analysts see a quarter-point increase to 5 percent later this year.

Lending to small and mid-sized businesses rose by 3.1 trillion won in July, slowing from June's 8.1 trillion won gain, which was the biggest monthly increase since the bank began compiling the figures in December 2000.

Mortgage lending advanced 127.4 billion in July, after climbing 710 billion won in June, today's report showed.

Lee and Finance Minister Kwon Okyu say that excessive lending and money-supply growth could push up prices and result in an asset bubble, undermining the economy's longest expansion in a decade.

In an effort to slow borrowing, the central bank on June 21 reduced the funds it makes available for loans to small businesses for the first time in six months. Last year, the bank ordered commercial lenders to hold more money as reserves.

Lf, the broadest measure of the money supply and formerly known as M3, rose an estimated 10.4 percent in June from May, the central bank said, citing preliminary figures. Lf stands for liquidity of financial institutions.