[2024 National Audit] Increase in Non-Performing Loans in the Financial Sector Over Two and a Half Years

Recently, the amount of non-performing loans at financial institutions has been continuously increasing. Although non-performing loans are on the rise regardless of the business sector, it has been revealed that they have nearly tripled in non-bank sectors such as mutual finance and savings banks over the past two years.

According to data on the "Changes in Non-Performing Loans by Financial Sector" submitted by the Bank of Korea to Jeong Seong-ho, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea (5th term, Gyeonggi Dongducheon-si Yangju-si Yeoncheon-gun Gap), non-performing loans at financial institutions are showing an increasing trend. Non-performing loans refer to bad loans where the funds lent by financial institutions have been overdue for more than three months, making recovery difficult.

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At the end of the first quarter of 2022, the total amount of non-performing loans across the entire financial sector was 2.52 trillion won, but by the end of the second quarter of this year, it recorded 7.39 trillion won, nearly tripling (293%). Among these, the amount of non-performing loans in the non-bank sector increased from 2.14 trillion won to 6.78 trillion won, more than tripling (316%).

The sector with the most severe bad loans is known to be mutual finance, which includes Nonghyup, Suhyup, Forest Cooperatives, Credit Unions, and Saemaeul Geumgo. Non-performing loans in mutual finance increased 3.4 times from 1.21 trillion won at the end of the first quarter of 2022 to 4.11 trillion won at the end of the second quarter of this year. Other non-bank financial institutions show similar trends. During the same period, non-performing loans at savings banks increased by 770 billion won, from 360 billion won to 1.13 trillion won.

On the 30th of last month, in Myeongdong Street, Jung-gu, Seoul, where advertisements related to card loans were posted, it was revealed that the scale of card loans and cash services reached an all-time high as the loan threshold of first-tier financial institutions such as banks increased amid the economic recession. Photo by Kang Jin-hyung aymsdream@

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General banks also recorded 380 billion won in the first quarter of 2022, 440 billion won in the first quarter of 2023, 560 billion won in the first quarter of this year, and 610 billion won in the second quarter of this year. The surge in non-performing loans is analyzed to be influenced by the restructuring of real estate project financing (PF) and loans to vulnerable borrowers such as fragile self-employed individuals, affecting the entire financial sector.

Assemblyman Jeong emphasized, "We must seriously consider the reality that non-performing loans are rapidly increasing not only in mutual finance but in all financial institutions," and added, "The Bank of Korea should pay particular attention to the financial stability of the non-bank sector and carefully decide monetary policy."

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