Domestic Banks to Raise Household Loan Thresholds in Q2... Lending Standards to Tighten

Domestic banks are expected to raise the bar for household loans in the second quarter of this year. Non-bank financial institutions are also likely to tighten their lending stance across all sectors.

Bank ATMs are installed in a row throughout downtown Seoul. Photo by Yonhap News Agency

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According to the results of the "Financial Institution Lending Attitude Survey" conducted by the Bank of Korea among credit officers at financial institutions, released on April 21, 2026, domestic banks are expected to strengthen their lending standards, particularly for household loans, in the second quarter of this year. The overall lending attitude index for domestic banks in the second quarter is -4, which is stricter than the -1 recorded in the first quarter. The index has remained negative for five consecutive quarters since the second quarter of last year. The household mortgage lending attitude index dropped from -6 in the first quarter to -8 in the second quarter, indicating a stronger tightening. A negative index means that more financial institutions expect to tighten their lending standards.

A Bank of Korea official stated, "Household loans are expected to be tightened across the board, including both mortgage loans and general credit loans, as part of household debt management efforts. For corporate loans, lending standards for large corporations (index: 3) are expected to ease slightly, while those for small and medium-sized enterprises (index: 0) are projected to remain at the same level as the previous quarter."

Credit risk is expected to rise for both corporates and households. The overall credit risk index for domestic banks in the second quarter stands at +29, up from +26 in the first quarter. A positive index indicates an increase in credit risk. In February 2026, the delinquency rate for corporate loans at domestic banks (measured as principal and interest overdue by more than one month) was 0.76%, up from 0.59% in December 2025. The Bank of Korea noted, "Corporate credit risk is expected to increase for both large corporations (25) and small and medium-sized enterprises (36) compared to the previous quarter, due to growing uncertainties in business conditions both domestically and internationally, including the situation in the Middle East." Household credit risk is also expected to rise due to concerns about the declining repayment capacity of vulnerable borrowers.

The overall loan demand index for domestic banks rose to 17 in the second quarter, up from 13 in the first quarter. Household loan demand is expected to decrease for mortgage loans due to tighter regulations but increase for general loans as a result of demand for living expenses and stock market investments. Corporate loan demand is expected to rise for both large corporations and small and medium-sized enterprises, driven by the need to secure liquidity amid heightened uncertainty at home and abroad.

Non-bank financial institutions are also expected to tighten their lending stance across all sectors. Credit risk is expected to increase in most sectors except for life insurers. Loan demand is projected to rise in most sectors, except for mutual finance institutions.

This survey was conducted from February 27 to March 13, 2026, targeting a total of 203 financial institutions. It examined recent trends over the past three months and the outlook for the next three months regarding lending attitudes, credit risk, and loan demand at financial institutions.

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