South Korean bank loan delinquency rate rises to 0.69% in August, FSS says
In short
The delinquency rate on won loans at South Korean banks was 0.69% at the end of August, up 0.06 percentage points from the previous month, according to the Financial Supervisory Service. Rates rose for corporate, small-business, sole-proprietor and household loans. The regulator said the level is manageable over the medium to long term but that the rise may continue in vulnerable sectors.
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The delinquency rate on won loans at South Korean banks was 0.69% at the end of August, up 0.06 percentage points from 0.63% a month earlier, according to the Financial Supervisory Service. The measure counts principal or interest overdue by one month or more. Yonhap and Chosun Ilbo put the rate a year earlier at 0.61%, making the August figure 0.08 points higher. [ 1 , 2 , 3 , 4 ]
Outlets differed on the historical comparison. Asia Economy and Yonhap said it was the highest since October 2016 (0.81%), a gap of 9 years 10 months. Chosun Ilbo said it was the highest for an end-August reading since 2016 (0.87%), and noted the rate had risen for a second month in a row. [ 1 , 3 , 4 ]
The corporate loan rate was 0.86%, up 0.08 points from 0.78%. Large-company loans stood at 0.39%, up 0.03 points from 0.36%. Yonhap said this extended the previous month's high, and that it was more than double the 0.15% of a year earlier. Chosun Ilbo put it at 2.6 times that level, and Asia Economy said it was the highest since April 2021. Small-business loans reached 1.00%, up 0.09 points from 0.91%. Small corporations were at 1.10% (from 1.00%) and sole proprietors at 0.86% (from 0.77%). Asia Economy said the sole-proprietor rate was the highest since May 2013. [ 1 , 2 , 3 , 4 ]
The household loan rate was 0.45%, up 0.03 points from 0.42%. Mortgages were at 0.31%, up 0.02 points from 0.29%, and credit and other non-mortgage household loans at 0.91%, up 0.07 points from 0.84%. Yonhap said the last figure was the highest since August of the previous year. [ 1 , 2 , 3 , 4 ]
New overdue amounts in August were 3 trillion won, 200 billion won less than the 3.2 trillion won of the previous month. Overdue loans cleared rose by 100 billion won to 1.5 trillion won from 1.4 trillion won. Asia Economy and Chosun Ilbo said that, with new overdue amounts at about twice the cleared amount, overdue loans grew by a net 1.5 trillion won. Chosun Ilbo added that banks usually clear overdue loans in bulk at quarter end, so rates tend to rise mid-quarter. The new delinquency rate was 0.12%. [ 1 , 2 , 3 , 4 ]
Yonhap said the rise was interpreted as reflecting new bad loans from the July workout and court-supervised rehabilitation filings of Joongang Group (중앙그룹) affiliates, together with accumulated repayment burdens from prolonged high interest rates. It also reported that the Bank of Korea's Monetary Policy Board kept its base rate at 3.00% the previous day. [ 4 ]
The Financial Supervisory Service said the rate was below the 0.78% average of the 10 years before COVID-19 and so manageable over the medium to long term. It added that, given economic uncertainty and rising market interest rates, the increase could continue in vulnerable sectors. It said it would keep urging banks to build loss-absorbing capacity and to sell or write off bad loans. According to Chosun Ilbo and Yonhap, it will also monitor banks' compliance with the Personal Debtor Protection Act when selling or collecting overdue loans, and encourage debt restructuring for borrowers who struggle to repay. [ 1 , 2 , 3 , 4 ]
Why it matters
The figures show overdue loans rising across corporate and household lending, with the regulator saying the increase could continue in vulnerable sectors. It said it will keep urging banks to build loss-absorbing capacity and to sell or write off bad loans.
Key facts
- The won-loan delinquency rate of domestic banks (loans overdue one month or more) was 0.69% at the end of August, up 0.06 percentage points from 0.63% a month earlier. [ 1 , 2 , 3 , 4 ]
- The rate was 0.08 percentage points above the same month a year earlier. [ 1 , 3 , 4 ]
- The corporate loan delinquency rate was 0.86%, up from 0.78%; the sole-proprietor loan rate was 0.86%, up 0.09 points. [ 1 , 2 , 3 , 4 ]
- The household loan delinquency rate was 0.45%, up 0.03 points from 0.42%. [ 1 , 2 , 3 , 4 ]
- New overdue amounts in August were 3 trillion won, down 200 billion won from the previous month, while overdue loans cleared rose by 100 billion won to 1.5 trillion won. [ 1 , 2 , 3 , 4 ]
- The Financial Supervisory Service said the rate is below the 0.78% average of the 10 years before COVID-19 and manageable over the medium to long term. [ 1 , 2 , 3 , 4 ]
Confirmed by several sources
- The delinquency rate on domestic banks' won loans was 0.69% at the end of August, up 0.06 percentage points from 0.63% the month before. [ 1 , 2 , 3 , 4 ]
- Corporate loan delinquency was 0.86%, large-company loans 0.39%, small-business loans 1.00%, small corporations 1.10% and sole-proprietor loans 0.86%. [ 1 , 2 , 3 , 4 ]
- Household loan delinquency was 0.45%, with mortgages at 0.31% and credit and other non-mortgage household loans at 0.91%. [ 1 , 2 , 3 , 4 ]
- New overdue amounts fell to 3 trillion won from 3.2 trillion won, while cleared overdue loans rose to 1.5 trillion won from 1.4 trillion won. [ 2 , 3 , 4 ]
- The Financial Supervisory Service said the rate is below the 10-year pre-COVID average of 0.78% and manageable over the medium to long term, but that the rise may continue in vulnerable sectors. [ 1 , 2 , 3 ]
- The Financial Supervisory Service said it will keep urging banks to build loss-absorbing capacity and to sell or write off bad loans. [ 1 , 2 , 3 ]
Still unclear
- How far back the August reading is the highest. Asia Economy and Yonhap say it is the highest since October 2016 (0.81%), 9 years 10 months. Chosun Ilbo says it is the highest for an end-August reading since 2016 (0.87%). The documents give different 2016 comparison figures.
- The date the Financial Supervisory Service released the figures. Newsis says the agency announced them on the 22nd; Asia Economy, Chosun Ilbo and Yonhap say the 23rd.
- Why large-company delinquency rose. Only Yonhap gives a reason, saying it was interpreted as new bad loans from the July workout and court-supervised rehabilitation filings of Joongang Group (중앙그룹) affiliates, plus accumulated repayment burdens from prolonged high rates.
- Whether sole-proprietor loan delinquency is at a 13-year high. Only Asia Economy says the 0.86% rate is the highest since May 2013 (0.92%), in 13 years 3 months.