September Bank Delinquency Rate Falls to 0.39%... Possibility of Further Increase Remains

Rising During the Quarter but Falling at Quarter-End
New Delinquency Rate Remains at a High Level

In September, the delinquency rate on domestic bank loans in South Korea showed a temporary decline. However, this was due to quarter-end sales effects, and there is potential for further increases going forward.

On the 22nd, the Financial Supervisory Service (FSS) announced that as of the end of September, the delinquency rate on won-denominated loans at domestic banks (based on principal and interest overdue by more than one month) was 0.39%. This represents a 0.04 percentage point decrease from the previous month but a 0.18 percentage point increase compared to the previous year.

An FSS official stated, "Banks typically strengthen management of delinquent loans at the end of each quarter, so delinquency rates tend to rise during the quarter and then fall at the quarter's end." The official also noted, "Since the rate of new delinquencies remains high, it is necessary to prepare for the possibility of further increases in delinquency rates."

By sector, as of the end of September, the delinquency rate for corporate loans was 0.42%, down 0.05 percentage points from 0.47% the previous month. The delinquency rate for large corporate loans rose by 0.01 percentage points to 0.14%. For small and medium-sized enterprise (SME) loans, the rate fell by 0.06 percentage points to 0.49%. The delinquency rate for individual business owner loans decreased by 0.04 percentage points to 0.46%.

The delinquency rate for household loans was 0.35%, down 0.03 percentage points from the previous month. The delinquency rate on mortgage loans remained unchanged at 0.24%. Household loans excluding mortgages (such as unsecured loans) had a delinquency rate of 0.65%, down 0.11 percentage points from the previous month.

An FSS official stated, "To prevent a sharp rise in bank delinquency rates from constraining the supply of funds, we are encouraging banks to expand the cleanup of delinquent and non-performing loans and to sufficiently provision loan loss reserves for vulnerable sectors."

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