The delinquency rate for won-denominated loans at domestic banks has risen for the second consecutive month. Concerns are growing over the soundness of corporate loans, particularly among small and medium-sized enterprises (SMEs) and small corporations.
According to the Financial Supervisory Service (FSS) on July 22, the delinquency rate for won loans at domestic banks was 0.67% at the end of May, an increase of 0.06 percentage points from the previous month. This figure is also 0.03 percentage points higher compared to the same month last year.
In May, newly delinquent loans amounted to 3.3 trillion won, an increase of 400 billion won from the previous month. Conversely, banks resolved 1.5 trillion won in delinquent loans through write-offs and sales, a decrease of 100 billion won. As a result, the total amount of delinquent loans increased by 1.7 trillion won over the month.
The delinquency rate for corporate loans rose to 0.84%, up 0.10 percentage points from the previous month. The delinquency rate for large corporate loans was 0.27%, while the rate for small business loans reached 1.00%. The delinquency rate for small corporations saw the largest increase, rising 0.13 percentage points to 1.11%. The delinquency rate for loans to individual business owners also increased to 0.84%, up 0.06 percentage points.
The delinquency rate for household loans rose to 0.45%, an increase of 0.03 percentage points from the previous month. The delinquency rate for mortgage loans was 0.31%, while the rate for household loans excluding mortgage loans, such as credit loans, rose to 0.90%, an increase of 0.07 percentage points over the month. However, the household loan delinquency rate is 0.02 percentage points lower than in the same month last year.
The FSS assessed that there is a need to prepare for a potential increase in delinquency rates due to the rise in corporate loans following the expansion of productive finance and rising interest rates. The agency plans to encourage banks to actively pursue write-offs and sales of non-performing loans while ensuring adequate capital and loan loss provisions are maintained.
* This article has been translated by AI.
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