South Korean banks are likely to tighten their grip on fresh loans in the third quarter of the year amid tougher lending rules and rising household credit risks due to the coronavirus pandemic, a central bank poll showed Monday.

The Bank of Korea said its index measuring the banks' attitude toward fresh lending stood at minus 3 for the July-September period, compared with 7 for the previous quarter.

The lower the reading, the more likely banks will tighten their restrictions on lending. A reading below zero means that the number of lenders that will restrict lending surpasses that of banks planning to ease lending criteria.

The gloomy outlook on bank lending comes as household credit risks are projected to rise in the third quarter amid the continued economic fallout from the pandemic.

Local lenders forecast credit risks of households and smaller firms, or the likelihood of borrowers being unable to repay debt, to increase in the third quarter from three months earlier, the BOK said.

The index for overall credit risks came to 18 for the current quarter, compared with 10 for the previous three months.

The indicator measuring households' credit risks reached 18 in the current quarter, up from six in the second quarter.

But credit risks of large companies are projected to lessen in the current quarter thanks to a recovery in exports and an expected improvement in their profitability. (Yonhap)