As 'Bittou' Increases... Securities Firms Reach Credit Extension Limits

Samsung Securities to Temporarily Suspend Credit Lending from Tomorrow... Other Securities Firms Join In

[Asia Economy Reporter Oh Ju-yeon] As individual investors borrowing funds from securities firms to purchase stocks, known as 'debt investment (borrowing to invest in stocks),' have surged significantly, securities firms are running out of credit extension limits one after another. Margin loans refer to investors borrowing money from securities firms by providing collateral to buy stocks. The annualized interest rate on margin loans, mainly used by individuals, ranges from 4% to 9%, making it a major revenue source for securities firms, but now they are facing situations where they must halt new credit extensions.

According to the financial investment industry on the 15th, Samsung Securities will temporarily suspend new margin loan purchases starting the next day due to the exhaustion of its credit extension limit. This is the second time Samsung Securities has halted margin loan purchases, following July 22. Samsung Securities, which has also currently suspended collateralized securities loans, will not allow new borrowing for investment for the time being. Existing customers can extend their loan maturity if they meet the requirements.

Securities firms feeling the burden of limits are temporarily closing their lending doors one after another. Korea Investment & Securities decided to temporarily suspend new margin loan agreements on the 11th, and Shinhan Financial Investment halted new collateralized securities loans and margin loans earlier this month. In June and July, securities firms such as Mirae Asset Daewoo temporarily suspended collateralized securities loans to manage credit extension limits. KB Securities stopped collateralized securities loans from July 23, and NH Investment & Securities has not issued new collateralized securities loans since the 3rd of last month.

Meritz Securities and Eugene Investment & Securities are not considering suspending credit extensions. They explained that their retail proportion is small, so they are not at the level of suspending credit extensions like other large firms. Kiwoom Securities, which has a large retail proportion, manages its list by increasing the cash ratio of deposits only for 'Kiwoom-type substitute' accounts and currently has no plans to suspend credit extensions.

This suspension of margin loan purchases is due to the rapid increase in individual debt investment. Although credit limits vary by securities firm, the surging loan demand has filled the credit extension limits of each securities firm. In the case of Hanwha Investment & Securities, the credit extension limit has risen to about 80%. According to the Capital Markets Act, the credit extension limit for comprehensive financial investment business operators (CIBs) with a capital of 3 trillion won or more is limited to within 200% of their capital (100% is limited to credit extensions related to small and medium enterprises and corporate finance).

The scale of individual margin loans has explosively increased since the end of March. When the KOSPI plunged due to the impact of the novel coronavirus disease (COVID-19), the margin loan balance fell to the 6 trillion won level due to forced sales and other factors. However, supported by the recent stock market rise, debt investment has increased, and the margin loan balance has surged to the 17 trillion won level. According to the Korea Financial Investment Association, the margin loan balance in the domestic securities market reached a record high of 17.3379 trillion won as of the 11th. By market, margin loans in the KOSPI market amounted to 8.6982 trillion won, and margin loans in the KOSDAQ market totaled 8.6397 trillion won.

This content was produced with the assistance of AI translation services.