S.Korea calls for watch on fast lending growth

SEOUL, July 15 (Reuters) - South Korean financial regulators on Tuesday called for a close watch over the quality of loans extended to consumers and companies, saying the slowing domestic economy is increasing risk.

They also said in a statement South Korean authorities would strengthen their supervisory activity over the recently fast lending growth because the lending has been partly funded with bonds or short-term money market instruments.

The statement was issued by the Financial Services Commission ahead of its planned meeting later in the day with officials from its implementing agency, the Financial Supervisory Service, to check the current status of the country's financial system.

Bank lending to local small and medium-sized enterprises jumped 29 percent over the first five months of this year to an outstanding 398.9 trillion won ($396.7 billion) while lending to households jumped 10 percent to 371.8 trillion won, it said.

The combined amount of loans owed by smaller firms and households, considered relatively more vulnerable to the economic downturn, was equivalent to slightly more than three-quarters of the country's annual gross domestic product.

The regulators said in the statement the country's financial system remained sound at present, despite the financial turbulence that has hit many developed economies. ($1=1005.5 Won) (Reporting by Yoo Choonsik; Editing by Keiron Henderson)