Last Year, Bank Household Loans Increased by 100 Trillion Won... Record High Growth Due to Yeongkkeul and Debt Investment

Bank of Korea 'Financial Market Trends in December 2020'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Last year, the increase in bank household loans, driven by a surge in demand to borrow money to buy stocks or houses, reached the highest level since the Bank of Korea began compiling preliminary data in 2004. The craze for "Yeongkkeul" (borrowing every last bit of money) and "Bitt-u" (investing with borrowed money) was confirmed through the increase in bank household loans.

On the 14th, the Bank of Korea announced the "Financial Market Trends for December 2020," revealing that the annual increase in bank household loans last year was 100.5 trillion won.

Yoon Ok-ja, head of the Market General Team at the Bank of Korea's Financial Market Department, explained, "Housing transactions increased significantly last year, and the demand for living expenses due to the COVID-19 pandemic, public offering subscriptions, and funds for stock purchases all contributed to a large increase in household loans."

Of the annual increase in household loans last year, housing mortgage loans increased by 68.3 trillion won, while other loans rose by 32.4 trillion won. The increase in housing mortgage loans was the largest since 2015, when it rose by 70.3 trillion won. Other loans recorded the largest increase ever. Most of these other loans are general unsecured loans, indicating that many people took out unsecured loans to cover the shortfall when purchasing homes or to invest in stocks.

Looking at the increase in December alone, the growth in household loans sharply slowed as banks began managing household loan growth. Household loans increased by 6.6 trillion won in December, down from 13.7 trillion won in the previous month. However, housing mortgage loans increased by 6.3 trillion won, similar to the previous month’s 6.2 trillion won, as demand for nationwide housing purchases and jeonse (long-term lease) funds rose despite a slowdown in group loan issuance.

Regarding bank jeonse deposit loans, the increase was 2.8 trillion won in December, continuing the upward trend from 2.3 trillion won in the previous month. The increase in jeonse deposit loans was the highest since February last year, when it reached 3.7 trillion won.

Meanwhile, corporate loans decreased in December as companies began managing their debt ratios. Large corporate loans fell by 5 trillion won, and small and medium-sized enterprise loans decreased by 600 billion won, resulting in a total corporate loan decline of 5.6 trillion won. However, on an annual basis, corporate loans still increased by 107.4 trillion won.

Despite a reduction in institutional investment demand at year-end, corporate bonds saw a slight net issuance of 300 billion won due to purchases by the Special Purpose Vehicle (SPV) for corporate bonds and commercial paper (CP). Stock issuance increased from 800 billion won to 3 trillion won as some large corporations conducted rights offerings.

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