South Korea banks signal modest credit easing as debt curbs persist

South Korean banks are indicating a cautious shift towards easier credit conditions in early 2026. The Bank of Korea's quarterly survey revealed that the lending sentiment index rose from -21 to 8 for January-March, marking the first positive sentiment since early 2025. This reflects a broader improvement in banks' appetite for home mortgage lending and corporate loans. However, regulatory pressures remain, as authorities maintain tight restrictions on household borrowing, particularly in the Seoul area, which will likely temper the pace of credit expansion. The gradual easing could support domestic growth expectations, particularly in financials and cyclically sensitive KOSPI stocks, but the impact on the won is more nuanced as it is primarily driven by global factors rather than domestic credit dynamics alone.