According to the financial sector on May 31, Bank A has identified new key management industries for the first half of the year, including the cast iron pipe manufacturing sector, textile fabric and retail textile products, and duty-free shops.
The textile industry, in particular, is experiencing structural decline due to intensified price competition with low-cost production countries like China and Southeast Asia. Duty-free shops are also struggling to recover profitability to pre-COVID-19 levels, impacted by a slowdown in the Chinese economy and a decrease in daigong (personal shoppers).
Bank B has added the metal manufacturing sector to its list of key management industries. This sector is commonly classified as a vulnerable industry due to oversupply. The ongoing influx of low-priced Chinese products has eroded profitability, compounded by a decline in demand due to the global economic slowdown.
The proactive management of vulnerable sectors by banks is driven by a noticeable increase in corporate insolvencies. According to the Financial Supervisory Service, the amount of non-performing loans at domestic banks rose by 1.1 trillion won in the first quarter of this year compared to the previous quarter. Among these, corporate loans accounted for a 1 trillion won increase, leading the upward trend.
The burden of delinquencies is also growing. The delinquency rate for corporate loans at the four major banks (KB Kookmin, Shinhan, Hana, and Woori) doubled from 0.23% at the end of 2022 to 0.46% in April of this year. The delinquency rate for small and medium-sized enterprises saw an even larger increase, rising from 0.26% to 0.59% during the same period.
A financial sector official stated, "We are strengthening monitoring based on industry ratings and outlooks. Given the recent significant increase in corporate loans through productive finance, we will enhance post-management and prepare for potential credit risks."
Looking ahead, banks are expected to tighten their corporate loan assessments further. With the Bank of Korea signaling the possibility of interest rate hikes within the year, companies may face additional burdens from high exchange rates, high oil prices, and now high interest rates. In fact, the Bank of Korea's '2026 Q1 Financial Institution Loan Behavior Survey' indicated that the credit risk index for large corporations in the second quarter rose by six points compared to the previous quarter.
Professor Kim Dae-jong of Sejong University remarked, "If key industries are neglected, the ripple effects on local economies and employment can be significant. Therefore, sound management by banks and government policies that support traditional industries are necessary."
* This article has been translated by AI.
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