Major Banks' Increase in Unsecured Loans 'Slows Down'... Effect of Tightening Lending

Using Bank Credit Loans for Real Estate and Stock Investments
Loan Growth Slows Due to Limit Reductions and Interest Rate Hikes

[Asia Economy Reporter Kim Min-young] The outstanding balance of personal credit loans at the five major domestic banks increased by only 2 trillion won last month. This is about half the increase of over 4 trillion won recorded in August. It is analyzed that the banks' deliberate loan speed adjustment was effective as financial authorities showed regulatory movements.

According to the banking sector on the 6th, the outstanding balance of personal credit loans at Shinhan, KB Kookmin, Hana, Woori, and NH Nonghyup Banks was recorded at 126.3868 trillion won as of the end of last month.

The month-on-month increase in credit loan balances at major banks was 2.8374 trillion won at the end of June, 2.681 trillion won at the end of July, and surged by 4.0705 trillion won in August compared to the previous month. However, at the end of last month, it increased by only 2.1121 trillion won compared to the end of the previous month.

The slowdown in the increase of credit loans is analyzed to be due to the banks' deliberate adjustment of loan speed. The credit loan balance increased by 2.6116 trillion won until the 24th of last month, but decreased by 500 billion won during the last three business days before the Chuseok holiday.

Due to the impact of the novel coronavirus disease (COVID-19) that occurred earlier this year, demand for living expenses loans, along with a boom in real estate and stock investments, caused the banking sector's loan balances to increase rapidly. Bank credit loans were used for so-called 'debt investment' (borrowing to invest) and 'all-in' (investing by gathering all resources) investments.

As these loans, which are lent based on individual credit, surged rapidly, financial authorities sent regulatory signals by setting household loan management targets for major banks, and the banks tightened their lending.

Woori Bank lowered the preferential interest rates for 'Woori WON Workplace Loan' and 'Woori Main Workplace Loan' by up to 0.40 percentage points starting today. KB Kookmin Bank also reduced credit loan limits for professionals and office workers starting from the 29th of last month. Other banks also joined in by reducing preferential interest rates or loan limits for credit loans.

Meanwhile, the outstanding balance of mortgage loans at the five major banks was 461.4255 trillion won as of the end of last month, an increase of 4.4419 trillion won compared to the end of the previous month.

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