BOK told the National Assembly to ‘tighten the exchange rate’, while the banks strengthened the increase in household loans

The Bank of Korea told the National Assembly to ‘tighten the exchange rate’, while the banks strengthened the increase in household loans

Although the Bank of Korea reported credit uneasiness due to 'exchange rate rise and overvaluation of housing' in a report to the National Assembly, in reality, deregulation to maintain low interest rates, which widened the interest rate gap with the US, was a 'tightening level' policy, raising the trend of increase in household loans and concentrating on mortgage loans. increased
Household lending increased in May as demand for home mortgages increased in the government and the Bank of Korea's deregulation policy, recording the largest increase in three months.
The increase in loans in the banking sector in May was 3.4 trillion won in loans to large corporations and 3.6 trillion won in loans to small and medium-sized enterprises. Individual businesses increased by 80 million won, and the increase in housing mortgage loans accounted for the highest portion of 4.3 trillion won.
On the 8th, the Bank of Korea presented a ‘Monetary Credit Policy Report’ to the National Assembly, saying, “Housing prices are still overvalued due to a gap with income levels, and the household debt ratio is still at a high level despite the recent decline.” As the trend of price decline is rapidly slowing and bank household loans are increasing again, especially housing-related loans, we need to pay attention to the possibility that household debt deleveraging (debt repayment/reduction) will be delayed.” pointed out the danger.
On the other hand, the 'Financial Market Trends' announced by the Bank of Korea on the 9th showed that household loans in the banking sector showed a downward trend until March and increased from April, increasing by 4.2 trillion won from a month ago to 1,56.4 trillion won in May. It was the largest increase in 1 year and 7 months since October 2017 (5.2 trillion won).
The Bank of Korea’s housing loan expansion policy is the only household loan that has seen a 4.3 trillion won increase in housing mortgage loans (807.9 trillion won, including mortgage loans), including the only decrease in household loans, the most since October 2021 (4.7 trillion won). the increase was large.
Demand for housing purchase funds continued to rise in the low interest rate policy, while deposit loans decreased for the 7th consecutive month, May March (-2.3 trillion won), April (-1.7 trillion won), May (-600 billion won).
A report by the Bank of Korea to the National Assembly called the “tightening level” policy for the base rate (3.50%), which is 1.75% lower than the US interest rate, and said, “The domestic economy will continue its low growth trend, but the inflation rate is expected to exceed the target level for a considerable period of time. Uncertainties in policy conditions are also high. We will focus on price stability and continue the stance of tightening for a considerable period of time.
The BOK report said, "If the US Federal Reserve (Fed) raises interest rates further or the domestic monetary policy stance changes early while the current account deficit continues, the upward pressure on the exchange rate may increase again." As downside risks and risks of imbalance in foreign exchange supply and demand grow, confidence in external soundness will weaken."
The report goes on to say, “Amid rising interest rates, there is potential for the credit risk related to real estate finance, centered on non-bank financial institutions, to spread to other sectors and market instability.” The loan delinquency rate is rapidly rising, and credit vigilance against securities companies and construction companies with large project financing (PF)-backed securities exposure (risk exposure amount) continues,” he said, revealing the credit crisis.
Regarding the low interest rate situation, the National Assembly report said, “In terms of market interest rates, short- and long-term Treasury bond yields have fallen rapidly this year, reducing the extent of tightening considerably.”
Corporate loans also increased rapidly, and the Bank of Korea revealed that loans to large corporations increased due to demand for corporate operating funds and funds for repaying corporate bonds, while loans to small and medium-sized enterprises were affected by banks' easing lending attitude.
Corporate loans at deposit banks in May (1204.5 trillion won) were 7.8 trillion won compared to the previous month, and were larger than the increase in April (7.5 trillion won).
The Consumer Price Index (CPI) of the Bank of Korea applies a price index that excludes the “own housing cost” applied in the United States, Japan and Europe from the beginning, and usually announces one-third smaller than the US CPI.
<Inflation is getting bigger and the economic growth rate is downside v rebound side effects, 2021.12. 2. Inflation main culprit Self-housing expenses Intensify crisis of exclusion from inflation only in Korea, 2022. 7.13. see>