Watchdog mulls reining in card firms' lending

By Lee Minji SEOUL, July 6 (Yonhap) -- South Korea's financial regulator said Wednesday it is considering curbing credit card firms' excessive growth competition by setting ceilings on loan increases and marketing costs, officials said Wednesday. The move comes as South Korea is grappling to tackle rising household debt. Heated lending and marketing rivalry among local credit card firms are feared to exacerbate the household debt problem. The Financial Supervisory Service (FSS), the executive body of the country's top financial watchdog, is mulling restricting the on-year growth of card firms' lending and individual users' limit to 5 percent, respectively, according to the officials. The 5 percent ceiling is based on the average growth rate of households' disposable income over the last five years, which stands at 5.1 percent. The FSS said it also plans to curb credit card firms' marketing activities by limiting the on-year growth of credit card issuance to 3 percent and their marketing costs to 12 percent. "The provided figures are the regulator's internal goals and are not compulsive. The numbers may be tweaked depending on card firms' size and market position," said an FSS official. "But we hope to send a signal to the industry that we are concerned about extreme competition." The FSS said it will receive credit card firms' business plans for the second half and review whether they are in line with the appropriate level. Companies with excessive growth plans may undergo a special inspection. In June, the country's financial regulators announced a set of measures as part of their efforts to stem credit card firms' excessive expansion. The June measures include raising credit card firms' loan-loss reserves in a bid to improve their capacity to absorb losses. Regulators are also currently conducting stress tests on companies' credit asset risks. South Korean credit card companies saw their credit assets grow 6.3 percent annually between 2006-2009 before jumping 14.7 percent in 2010. Their marketing costs surged 30.3 percent last year, compared with a 27.1 percent annual gain seen during the four-year period.