South Korean banks to tighten lending on big firms in Q3

South Korean banks are expected to tighten their lending toward big firms in the third quarter due to uncertainties over the U.S. quantitative easing, in contrast to easier lending practices toward small companies, central bank survey showed Thursday. Lending attitude index, which gauges lending practices of banks over the next three months, stood at 11 for the July-September period, unchanged from the prior three-month period, according to the Bank of Korea (BOK). The sub-index for small firms stayed at a high level of 13, but the one for big companies fell to minus 3 in the third quarter from zero in the prior quarter. The index was based on a survey of 16 local banks conducted between June 10 and 21. A reading below zero means the number of banks, which will restrict their lending, outnumbered that of lenders that will ease them. Banks would ease lending attitude towards small growth companies in a bid to meet the government\'s efforts to expand financial support to them, the central bank said, noting that lending to big corporations will be tightened amid the escalating uncertainties over the tapering of bond purchases in the United States. Corporate credit risks are expected to stay high. The credit risk index, which measures risks of borrowers\' failure to service debts, increased to 25 in the three-month period through September from 22 three months earlier. The sub-index for small companies rose from 28 to 31 over the cited period, with the reading for big firms rising from 6 to 13. Credit risks for small firms would deepen further amid the prolonged fragility of domestic demand, the BOK said, noting that those for big companies would widen in the third quarter due to lingering external uncertainties.