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Tougher loan screening to help better manage household debt: regulator
By YonhapPublished : Oct. 16, 2018 - 10:38
Banks will be required to implement a stricter screening rule for mortgage loans starting this month so as to better manage growing household debt, according to the head of the financial regulator Tuesday.
Banks have applied for the so-called debt service ratio to almost all household loans on a pilot basis since earlier this year. The new rule will become mandatory later this month.
DSR measures how much a borrower has to pay in principal and interest payments in proportion to his or her yearly income. It is one of the barometers checked for risky household loans.
Choi Jong-ku, chairman of the Financial Services Commission, told reporters that banks would be required to have several DSR standards to head off a rise in risky household loans.
Commercial banks, regional banks and state-run banks would have different DSR standards, Choi said.
Details of the DSR standards will be unveiled later this week, Choi said.
South Korea's household debt reached a record high of nearly 1,500 trillion won ($1.32 trillion) as of the end of June.
Some retail investors have urged the regulator to ease rules for them to conduct the short selling of listed stocks.
Choi said the FSC will consider reviewing measures for retail investors to engage in short selling.
South Korea prohibits so-called naked short selling, in which investors unload shares that they do not own but permits investors to sell borrowed stocks. Despite the ban, some critics suspect that banned short selling actually takes place.
Choi said the FSC will closely watch the issue of naked short selling and pledged to improve stock trading rules for retail investors. (Yonhap)
