2011/04/24 16:04 KST
SEOUL, April 24 (Yonhap) — South Korea’s financial regulator said Sunday it is gearing up to tighten its supervision of credit card companies on mounting worries that their easy loans may lead to a massive default crisis.
The Financial Supervisory Service (FSS) plans to set up a new division tasked with supervising and inspecting credit card companies in its looming reshuffle and will almost double the workforce for that task, the regulator said.
The decision comes as part of the regulator’s expansion of inspection forces aimed at preempting a rise in credit card firms’ risky loans issued mostly to borrowers with low creditworthiness.
Rising card loans and cash advances issued by credit card companies, which are mounting a heated competition to outgrow each other, are cited by many policymakers and experts as a major economic risk that can result in massive growth in household debts and loan delinquencies.
“The FSS will preemptively respond to prevent further expansion of credit card firms’ small-amount credit loans,” an FSS official said.
Loans issued through credit cards jumped 19 percent last year, far outperforming the entire financial sector, whose lending grew an average of 6.3 percent, the official said.
The efforts to clamp down on excessive credit card loans came as the sector jumps into an asset-growth race with top banking group KB Financial Group Inc. and Hana Financial Group Inc. recently floating new credit card affiliates to join the competition.
The total assets of local credit card firms reached 55 trillion won (US$50.9 billion) as of the end of 2010, the highest reading since 68 trillion won recorded at the end of 2002, when massive loan defaults at credit card firms resulted in a series of credit card company bankruptcies.
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