Mortgage Crisis Looming: Kookmin CEO

On December 11, Chief Executive Officer of Kookmin Bank Kang Jeong-won said, “Nowadays, non-banking financial institutions such as mutual savings banks and venture funds offer indiscriminate mortgage loans, risking a financial crisis from the non-banking sector.”

In an interview with this newspaper at the bank’s head office in Yeouido, he said, “The non-banking sector provides mortgages as long as Loan-to-Value (LTV) ratios are right without considering borrowers’ ability to repay. And that is worrisome.”

He pointed out, “Since banks have many requirements to meet, including debt-to-income (DTI) ratios before lending, they don’t face high risks. The non-banking sectors, on the other hand, do face high risks because they do not even look into borrowers’ cash flows.

He also said, “Even though real estate prices remain the same, things don’t look good since those who took out mortgages have high debt ratios. As households incur more debt, the non-banking sector is highly likely to become insolvent first.”

Regarding the cancelled sale of Korea Exchange Bank (KEB) last month, he said, “Kookmin Bank is a credible buyer for the Lone Star Fund. And the opportunity to acquire it will present itself.” He insinuated that he did not give up a plan to acquire KEB.

jinhup@donga.com jarrett@donga.com