Korea’s non-bank financial firms rapidly increased their share in the household loan market, seeing their combined total reach nearly 300 trillion won ($259 billion) and even outpacing banks, data showed on Thursday.

The non-bank financial companies refer to savings banks, credit card operators, and insurance firms, and their household loan expansion in recent months is viewed by authorities as an additional risk factor to the country’s broader household debt situation.

The size of non-bank financial firms’ outstanding household loans stood at 289.3 trillion won as of end-November, while the figure for banks was 452 trillion won, according to the data by the Financial Services Commission and the Financial Supervisory Service.

The gap between banks and non-bank financial firms in the amount of household loans is narrowing at a fast clip, prompting policymakers to show concern about extra burdens on the country’s heavy household debts.

The non-bank financial firms’ combined assets are also on the rise, registering 889 trillion won as of end-June. Given that their assets were 610 trillion won in June 2008, their market size jumped 45.7 percent over a three-year period, while banks’ total assets increased by 10.3 percent.

The data illustrates the heady growth of non-bank financial firms in the domestic market as the country weathered the financial crisis sparked by the bankruptcy of Lehman Brothers in 2008.

The rapid expansion is fueled by the non-bank financial firms’ focus on extending loans to households.

Financial regulators predict that the total loans extended by non-bank financial units would surpass 300 trillion won within the first half of next year.

Officials at the FSC said the bloated share of non-bank financial firms in the household loans segment will pose a serious threat to the country’s economy at a time when consumers confront a slew of uncertainties such as the eurozone sovereign debt crisis.

Compared with banks which tend to apply tougher personal credit standards in extending fresh loans, non-bank financial firms cater largely to individuals with poor credit records, many of whom could not secure loans at banks.

The growing number of people who borrow money from non-bank financial companies, therefore, underscores the greater risks, which could worsen the household debt that is already causing concerns.

The FSC and FSS said it would beef up monitoring of the non-bank sector to rein in the household loans.

By Yang Sung-jin (insight@heraldcorp.com)