Savings banks' household loans increase by nearly 2 trillion won in Q3... Concerns over balloon effect

[Asia Economy Reporter Kim Eunbyeol] The amount of money borrowed by households from savings banks in the third quarter of this year reached a record high.

According to the Bank of Korea on the 25th, the outstanding household loans from savings banks at the end of the third quarter stood at 29.5913 trillion won. This is an increase of 1.8267 trillion won in just three months compared to the previous quarter. This increase is the largest since the Bank of Korea began compiling related statistics in the first quarter of 2003.

It is also the first time in three and a half years since the first quarter of 2017 (1.1 trillion won) that household loans from savings banks increased by more than 1 trillion won in a single quarter. The first time the increase exceeded 1 trillion won was in the first quarter of 2015 (1.0239 trillion won).

A Bank of Korea official explained, "Like overall household loans, household loans from savings banks increased mainly in other loans including unsecured loans," adding, "It appears that people borrowed money to cover living expenses and invested in houses and stocks."

Recently, concerns have arisen that loan demand is shifting to savings banks, which have relatively higher interest rates, as financial authorities tighten loan regulations on the primary financial sector. In particular, there are worries that the relatively higher interest rates of savings banks compared to the primary financial sector could worsen household financial conditions.

The total credit of savings banks exceeded 70 trillion won for the first time ever in July this year. It increased from 70.6117 trillion won in July to 71.6962 trillion won in August, and further grew to 73.2318 trillion won by the end of the third quarter in September.