March Bank Household Loans Decrease for 4th Month... Largest Drop on Record

BOK Announces 'March Financial Market Trends'

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Due to the government's and banking sector's management of unsecured loans and the rise in loan interest rates, household loans in the banking sector saw the largest decline ever recorded in March. Household loans have decreased for four consecutive months, marking the first time since statistics began.

According to the "March Financial Market Trends" released by the Bank of Korea on the 13th, as of the end of March this year, the outstanding balance of household loans at banks was 1,059 trillion won, down 1 trillion won from the end of February. This is the largest decrease recorded for March since statistics began in January 2004.

Looking at the changes in household loans by type, the balance of mortgage loans, including jeonse (key money deposit) loans, stood at 784.8 trillion won at the end of March, increasing by 2.1 trillion won in one month. Despite a slowdown in housing sales transactions, mortgage loans increased slightly in February (1.7 trillion won) due to continued demand for funds related to jeonse and group loans.

Other loans, including unsecured loans, decreased by 3.1 trillion won in one month, marking the largest decline since statistics began in 2004 as of March.

A Bank of Korea official explained, "Other loans have seen an expanded decline centered on unsecured loans due to continued management of unsecured loans by the government and banks, rising loan interest rates, and sluggish housing market conditions."

As of the end of March, the outstanding balance of corporate won-denominated loans at banks was 1,093.9 trillion won, increasing by 8.6 trillion won in one month.

Loans to large corporations recorded an increase of 900 billion won, slightly up from 700 billion won in February, as facility fund demand rose despite a decrease in working capital loans. Loans to small and medium-sized enterprises (SMEs) increased by 7.7 trillion won, up from 5.6 trillion won in February, as facility fund demand remained robust amid the extension of COVID-19 financial support until September this year.

The total increase in corporate loans (8.6 trillion won) and SME loans (7.7 trillion won) in March were both the second highest on record for March since statistics began in June 2009.

Non-loan deposits at banks stood at 2,152.7 trillion won as of the end of March, up 8 trillion won from the end of February.

By deposit type, demand deposits increased by 16.3 trillion won due to corporate fund inflows for quarter-end financial ratio management and dividend payments, while time deposits decreased by 3.6 trillion won, turning negative, as funds flowed out to other financial institutions despite inflows from corporations and households.

Deposits at asset management companies increased by 4.3 trillion won in March. Money Market Funds (MMFs) decreased by 1.2 trillion won due to quarter-end government fiscal spending and fund outflows aimed at improving banks' BIS ratios. Bond funds decreased by 2.1 trillion won, but other funds and equity funds increased.

The Bank of Korea stated, "Other funds and equity funds increased by 5.9 trillion won and 1.8 trillion won respectively," adding, "The growth trend continued mainly in North American region funds, which are relatively less affected by the Ukraine crisis."

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