[Financial Stability Situation] "Non-bank Real Estate Loans Increase by 24.9 Trillion Won... Public Guarantee Institutions' Burden Rises"

Bank of Korea to Announce 'Financial Stability Situation' on 25th
Increase in Real Estate Loans by Non-Bank Financial Institutions... "Risk Exposure Also Growing, Caution Needed"

[Asia Economy Reporter Jang Sehee] As investment demand using corporations before regulatory tightening surged, the scale of real estate industry loans in the non-bank sector has significantly increased. In particular, it was pointed out that the increase in non-bank real estate industry loans greatly exceeds bank loans, which requires caution.

According to the Bank of Korea's 'Financial Stability Status (March 2021)' data on the 25th, the increase in real estate industry loans by non-bank financial institutions was 24.9 trillion KRW, which was larger than the increase in real estate industry loans by banks (20.6 trillion KRW).

This means that the risk exposure of non-banks, which have weaker risk management and loss absorption capacity compared to banks, has further increased.

The total real estate finance exposure was 2,279.3 trillion KRW at the end of 2020, up 10.3% from the same period the previous year (2,067 trillion KRW). The real estate exposure growth rate has shown an increasing trend for three consecutive years, following 7% in 2018 and 7.7% in 2019. The ratio of real estate finance exposure to nominal Gross Domestic Product (GDP) rose to 118.4%.

Looking at the changes in proportions, household loans increased by 8.92 trillion KRW, centered on jeonse-related guarantees (3.54 trillion KRW) and policy mortgage loans (2.11 trillion KRW).

Corporate loans increased by 8.14 trillion KRW due to the expansion of real estate industry loans and an increase in corporate loans related to real estate finance.

By the final risk-bearing entities, guarantee institutions bore the highest burden at 9.33 trillion KRW, while non-banks and banks bore 4.41 trillion KRW and 3.5 trillion KRW respectively.

The report emphasized, "The increase in guaranteed loans weakens banks' incentives for risk management related to housing loans," and "The burden on public guarantee institutions that will make substitute payments in case of loan defaults is increasing." It also stressed, "As real estate-related financial investment products rapidly increase, the transmission channels of shocks in the housing market are diversifying," and "Attention should be paid to the expanding trend of exposure and changes in risk composition."

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