Strengthened Loan Regulations and Rising Interest Rates Lead to 3 Consecutive Months of Decline in Bank Household Loans... Corporate Loans Increase

Bank Other Loans Decrease by 1.9 Trillion Won

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Due to the government's strengthened loan regulations and rising loan interest rates, household loans in the banking sector have decreased for three consecutive months. This marks the first time since statistics began in 2004 that household loans have declined for three straight months.

According to the 'February Financial Market Trends' released by the Bank of Korea on the 10th, as of the end of February this year, the outstanding balance of household loans at banks stood at 1,060.1 trillion KRW, down by 100 billion KRW from the end of January. Although the decrease narrowed compared to January, this is the first decline since January 2004 based on February's increase amount.

Looking at the changes in household loans by type, the balance of mortgage loans, including jeonse deposit loans, was 782.8 trillion KRW as of the end of February, increasing by 1.8 trillion KRW in one month. Mortgage loans saw continued demand related to jeonse and group loans, but the increase was slightly smaller than January's 2.2 trillion KRW due to a slowdown in housing sales transactions.

Other loans, including unsecured loans, decreased by 1.9 trillion KRW in one month, marking the largest decline since statistics began in 2004 as of February.

A Bank of Korea official explained, "Other loans have decreased for three consecutive months due to the government's strengthened loan regulations, rising loan interest rates, continued management of unsecured loans by banks, and a slowdown in demand for investment funds such as stocks."

As of the end of February, the outstanding balance of corporate won-denominated loans at banks was 1,085.3 trillion KRW, increasing by 6.3 trillion KRW in one month.

Loans to large corporations recorded an increase of 700 billion KRW, down from 4 trillion KRW in January, due to decreased demand for working capital. Loans to small and medium-sized enterprises (SMEs) continued to rise due to ongoing demand for facility funds and COVID-19 related funds, with the increase exceeding the usual level.

The total increase in corporate loans (6.3 trillion KRW) and SME loans (5.6 trillion KRW) in February were both the second highest since statistics began in June 2009 for February data.

The outstanding balance of bank deposits (non-loan) stood at 2,144.7 trillion KRW as of the end of February, sharply increasing by 25.7 trillion KRW from the end of January.

By deposit type, demand deposits increased by 21.4 trillion KRW due to inflows of surplus funds from corporations and local governments, while time deposits rose by 7.2 trillion KRW amid inflows of local government funds, efforts by some banks to attract corporate funds, and rising deposit interest rates.

Deposits at asset management companies increased by 2.9 trillion KRW during February. Money Market Funds (MMFs) decreased by 3.8 trillion KRW, slightly declining as short-term funds flowed into banks but government-managed funds flowed out.

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