Financial regulator to hold emergency meeting with major banks amid steep rate hikes

(Yonhap)

South Korea's financial regulator said Thursday that it will convene an emergency meeting this week with officials of major banks to look into how they determine interest rates on lending amid worries over recent steep hikes in borrowing costs.

The Financial Supervisory Service (FSS) will hold the meeting on Friday with officials handling credit affairs at eight banks, including Kookmin, Shinhan, Woori and Hana, according to the regulator. A top FSS official will preside over the meeting.

The meeting will be convened amid worries that recent steep interest hikes on lending will likely increase the burden on indebted households.

The rising borrowing costs are in line with the government's efforts to normalize expansionary lending put in place to prop up the economy affected by the coronavirus pandemic.

"At a time when a transition is being made from credit expansion to credit shrinking, worries are being raised over the overall increasing trends of interest rates," the FSS said in a press release.

"The FSS will look into banks' systems to determine interest rates on lending and their operation status and also push for improvements if necessary," it added.

Interest rates have been trending upward as the government has tightened rules on lending to keep a lid on fast-increasing household debt.

In October, the government announced it will enforce stricter lending rules based on borrowers' repayment capability through the debt service ratio from January next year to rein in household debt. (Yonhap)