[BOJ Financial Stability Report] Mutual Finance Non-Mortgage Loans Total 266 Trillion Won, Account for 87% of Corporate Loan Increase

Corporate Loans Account for 87% of Increase in Non-Mortgage Loans
BOK Urges to Ease Concentration of Corporate Loans in Real Estate and Construction Sectors

[Asia Economy Reporter Jang Sehee] As of the end of March, non-housing collateral loans in mutual finance recorded 266 trillion KRW. The proportion of non-housing collateral loans also increased to 64.2%.

According to the "2021 First Half Financial Stability Report" released by the Bank of Korea on the 22nd, corporate loans accounted for 87% of the increase in non-housing collateral loans since 2017.

The Bank of Korea analyzed that investment demand related to real estate development and leasing drove the increase in non-housing collateral loans.

Looking at the increase in non-housing collateral loans by collateral type, commercial buildings were the largest at 10 trillion KRW, followed by land and others at 9.8 trillion KRW and 4.8 trillion KRW, respectively.

Regarding the delinquency rates of non-housing collateral loans by borrower type, households recorded 1.32%, while corporations showed a higher level at 2.40%. The overall delinquency rate for non-housing collateral loans was 1.81%.

Loans with lump-sum repayment and variable interest rates accounted for 76% and 87%, respectively.

The average loan amount for non-housing collateral loans was 170 million KRW, which is significantly larger compared to 90 million KRW for housing collateral loans and 20 million KRW for other loans. Accordingly, the Bank of Korea analyzed that the debt repayment burden on non-housing collateral loan borrowers is relatively high.

The Bank of Korea pointed out that since there are many corporate loans related to real estate industries, they may be sensitive to future real estate market conditions.

The Bank of Korea stated, "It is necessary to alleviate the concentration of corporate loans in real estate and construction industries (53.2%) and strengthen the loan screening system to ensure that loan funds flow into productive sectors."