The delinquency rate for domestic banks' won-denominated loans has risen for two consecutive months, nearing 0.7%. The increase is primarily driven by rising delinquencies among small and medium-sized enterprises (SMEs) and self-employed individuals, indicating a growing repayment burden for vulnerable borrowers.
According to the Financial Supervisory Service (FSS) on October 23, the delinquency rate for won-denominated loans at domestic banks was 0.69% at the end of August, up 0.06 percentage points from the previous month’s 0.63%. This figure is also 0.08 percentage points higher than the same month last year, which recorded a rate of 0.61%. The delinquency rate has increased from 0.56% at the end of June to 0.63% at the end of July, and then to 0.69% at the end of August.
Notably, the delinquency rate for corporate loans has shown a significant upward trend. At the end of August, the corporate loan delinquency rate was 0.86%, an increase of 0.08 percentage points from the previous month. Among these, the delinquency rate for SME loans rose to 1.00%, up 0.09 percentage points from 0.91% the previous month.
The delinquency rate for loans to small corporations increased to 1.10%, a rise of 0.10 percentage points in one month. The delinquency rate for self-employed loans also increased from 0.77% to 0.86%, up 0.09 percentage points. In contrast, the delinquency rate for large corporate loans rose to 0.39%, an increase of 0.03 percentage points from the previous month.
For household loans, the delinquency rate was 0.45%, up 0.03 percentage points from the previous month. The delinquency rate for mortgage loans was 0.31%, a rise of 0.02 percentage points, while the delinquency rate for household loans excluding mortgage loans increased to 0.91%, up 0.07 percentage points.
In August, newly incurred delinquent loans amounted to 3 trillion won, a decrease of 200 billion won from the previous month. Conversely, banks resolved 1.5 trillion won in delinquent loans through write-offs and sales, an increase of 100 billion won. The volume of new delinquent loans exceeded the amount resolved, resulting in an overall increase of 1.5 trillion won in total delinquent loans.
The FSS assessed that the current delinquency rate remains below the long-term average of 0.78% from 2010 to 2019, indicating it is manageable in the medium to long term. However, it cautioned that rising market interest rates and domestic and international economic uncertainties could continue to drive up delinquency rates in vulnerable sectors.
* This article has been translated by AI.
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