Delinquency Rates Continue to Rise in Secondary Financial Institutions Including Savings Banks... Financial Supervisory Service to Conduct On-Site Inspections Next Month

Published 30 Nov.2023 12:00(KST)

Lee Junsu, Deputy Governor of the Financial Supervisory Service [Photo by Yonhap News]

As of the 30th, the base interest rate was held steady at 3.5%, and the Financial Supervisory Service (FSS) announced plans to strengthen management and supervision of the soundness of financial companies. The FSS will conduct on-site inspections next month targeting savings banks and mutual finance sectors where delinquency rates are rising.

Lee Junsu, Deputy Governor of the Banking and Small and Low-Income Sectors at the FSS, said at a press briefing on the morning of the same day, "Delinquency rates will continue to rise until early next year," adding, "The real economy is not in good shape, and with the prolonged period of having to bear high interest rates, delinquency rates are inevitably going to increase for the time being."

According to the FSS, due to the prolonged high interest rates and the slowdown in the real estate market, delinquency rates in small and low-income financial companies have been on an upward trend this year.

Looking at delinquency rates by sector, as of the end of September, the delinquency rate for savings banks was 6.15%, up 0.82 percentage points from the previous quarter (5.33%). For mutual finance, the delinquency rate as of the end of September was 3.1%, an increase of 0.30 percentage points from the previous quarter (2.8%). In the case of specialized credit finance companies, credit card companies maintained a delinquency rate of 1.6%, and capital companies maintained 1.81%, similar to the previous quarter.

By segment, savings banks saw an increase in delinquency rates centered on corporate loans (7.09%), while household loans (5.40%) showed a decline in delinquency rates compared to the first quarter, indicating a slowdown in the upward trend. For corporate loans, the delinquency rate for individual business owners (7.49%) was higher than that for corporations.

In mutual finance, the delinquency rate for household loans (1.56%) was at a favorable level, but the delinquency rate for corporate loans was 4.59%, with the corporate loan delinquency rate reaching 7.05% due to the impact of the real estate market slowdown. In particular, the delinquency rate for corporate loans in mutual finance rose sharply from 3.38% at the end of last year to 7.05% as of the end of September, an increase of 3.67 percentage points.

Deputy Governor Lee explained, "Although delinquency rates in the small and low-income sectors have continued to rise, the overall rate of increase has slowed compared to the first half of the year when the economy was at its lowest point," adding, "Considering the sound loss absorption capacity, the possibility of the delinquency rate increase spreading as a systemic problem is not high at this time."

However, considering the continuation of the current interest rate level and the possibility of delayed economic recovery, he added that continuous focused monitoring of the asset soundness of loans in vulnerable sectors such as low-credit borrowers will be necessary next year as well. Deputy Governor Lee said, "We will actively manage this through on-site inspections next month."