The growth of loans to South Korea's small businesses and retailers poses risks for the quality of local lenders' assets, a global ratings agency said on Nov. 5, 2018.
"Weakening consumer sentiment and rising unemployment could affect the performance of these businesses, and accordingly the quality of the loans," said Sophia Lee, Vice President and Senior Credit Officer at Moody's Investors Service, in the latest report.
The deterioration in the quality of those loans would negatively affect the local banks, the expert said, adding that the scale of the loans will remain high in the coming years.
In June, loans for small businesses and home office operators surged 15.6 percent on-year to stand at 590.7 trillion won (US$525.77 billion), according to government data. Of them, banks accounted for nearly 70 percent.
"While the performance of the loans has been healthy so far, several macroeconomic indicators point to rising asset risk, with the small households that typically take out these loans particularly sensitive to changes in the local economy," the report noted. (Yonhap)