[Asia Economy Reporter Kim Jin-ho] As financial authorities tightened total household debt regulations, banks raised lending standards, leading to a sharp increase in household loans centered on insurance companies. The amount increased by more than 1 trillion won in just three months, which is interpreted as a so-called 'balloon effect.'
According to the 'Status of Insurance Company Loan Claims as of the End of September 2021' released by the Financial Supervisory Service on the 6th, the outstanding loan claims of insurance companies in the third quarter of this year amounted to 262.4 trillion won, an increase of 2.1 trillion won compared to the previous quarter. After a 5.2 trillion won increase in the second quarter, it rose by 7.3 trillion won in half a year.
The outstanding household loans were recorded at 127.7 trillion won, an increase of 1.1 trillion won from the previous quarter. Insurance policy loans increased by 600 billion won compared to the previous quarter, and mortgage loans also rose by 400 billion won during the same period. As comprehensive loan regulations made it increasingly difficult to borrow money mainly from banks, it is analyzed that borrowers turned to insurance companies.
Corporate loan balances stood at 134.5 trillion won, up 1 trillion won from the previous quarter. Loans to small and medium-sized enterprises increased by 1 trillion won, reaching an outstanding balance of 87.4 trillion won. The outstanding balance of loans to large corporations remained the same as the previous quarter.
The delinquency rate and non-performing loan ratio of loan claims decreased. As of the third quarter, the delinquency rate (principal and interest overdue for more than one month) of insurance company loans was 0.14%, down 0.03 percentage points from the previous quarter. The household loan delinquency rate was 0.29%, unchanged from the previous quarter, and corporate loans were 0.07%, down 0.03 percentage points. The non-performing loan ratio was 0.12%, 0.02 percentage points lower than the previous quarter.
A Financial Supervisory Service official stated, "We will continuously monitor the implementation status of household loan management and delinquency rates by insurance companies, as well as loan soundness indicators," adding, "In response to the ongoing COVID-19 situation, we plan to encourage strengthening loss absorption capacity through sufficient provisioning for loan losses."
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