ID :
188742
Wed, 06/15/2011 - 11:44
Auther :
Shortlink :
https://oananews.org//node/188742
The shortlink copeid
Card firms face tougher loan-loss reserve rules
SEOUL, June 15 (Yonhap) -- South Korea's financial watchdog said Wednesday it will require local card companies to set aside more loan-loss reserves in an effort to stem their asset growth and curb household debt.
The Financial Services Commission (FSC) said it will drastically raise the rate of loan-loss reserves by local card firms against their credit assets by taking into account asset quality.
"As card firms' capacity to absorb losses improves and burdens to put more reserves increase, the move will help curb excessively heated competition for card loans," the FSC said in a statement.
The watchdog said it will differentiate the loan-loss reserve rate for credit issuance assets and card loans, which will lead local card firms to put up about 211.7 billion won (US$195.2 million) in additional reserves.
Under the new rules, the rate for card loans, which are overdue for more than three months, but can be re-collected, will be raised to 65 percent from the current 20 percent.
The move came as the FSC said last week it will limit credit card companies' total assets and new card issuance and marketing costs in an effort to curb snowballing household debt.
South Korea is grappling with ballooning household debt, which has fast grown on the back of low borrowing costs.
Korean credit card firms saw their assets and marketing costs jump at a faster pace last year as entrances by new card firms added to competition in the sector.
In 2003, the South Korean economy was hit by the burst of the credit card bubble after card firms excessively issued plastic money even to non-qualified customers.
As of the end of last year, card loans reached 27.9 trillion won, up 19 percent from the previous year. Local card companies' credit assets grew 6.3 percent annually during the 2006-2009 period before jumping 14.7 percent in 2010.
sooyeon@yna.co.kr
The Financial Services Commission (FSC) said it will drastically raise the rate of loan-loss reserves by local card firms against their credit assets by taking into account asset quality.
"As card firms' capacity to absorb losses improves and burdens to put more reserves increase, the move will help curb excessively heated competition for card loans," the FSC said in a statement.
The watchdog said it will differentiate the loan-loss reserve rate for credit issuance assets and card loans, which will lead local card firms to put up about 211.7 billion won (US$195.2 million) in additional reserves.
Under the new rules, the rate for card loans, which are overdue for more than three months, but can be re-collected, will be raised to 65 percent from the current 20 percent.
The move came as the FSC said last week it will limit credit card companies' total assets and new card issuance and marketing costs in an effort to curb snowballing household debt.
South Korea is grappling with ballooning household debt, which has fast grown on the back of low borrowing costs.
Korean credit card firms saw their assets and marketing costs jump at a faster pace last year as entrances by new card firms added to competition in the sector.
In 2003, the South Korean economy was hit by the burst of the credit card bubble after card firms excessively issued plastic money even to non-qualified customers.
As of the end of last year, card loans reached 27.9 trillion won, up 19 percent from the previous year. Local card companies' credit assets grew 6.3 percent annually during the 2006-2009 period before jumping 14.7 percent in 2010.
sooyeon@yna.co.kr
