Inbaeng Virtual Asset Account Credit Loan Delinquency Rate Hits Record High... "Need to Reduce Dependence"

Submission Materials to FSC by Kim Heegon of the Political Affairs Committee
August Delinquency Rate of K-Bank at 1.07%, 3.25% for Low-to-Mid Credit
K-Bank Loan Balance Exceeds 7 Trillion Won, Risk Increasing

The delinquency rate on personal credit loans for customers with virtual asset-linked accounts at internet banks has reached an all-time high. Loans for virtual asset investments are also rapidly increasing every year, raising concerns about the urgent need for soundness checks related to virtual assets.

According to data submitted by the Financial Supervisory Service to the office of Kim Hee-gon, a member of the National Assembly's Political Affairs Committee from the People Power Party, as of the end of August this year, the delinquency rate on personal credit loans for customers using virtual asset-linked accounts at K Bank was 1.07% (delinquent amount of 75.458 billion KRW). Kakao Bank recorded a delinquency rate of 0.58% and a delinquent amount of 3.457 billion KRW during the same period. Toss Bank does not operate virtual asset-linked accounts.

The situation is more severe for medium- to low-credit customers. Among K Bank customers with virtual asset-linked accounts who are in the lower 50% of KCB credit scores, the delinquency rate on credit loans was 3.25% (49.031 billion KRW) as of the end of August, which is 2.77 percentage points (about 7 times) higher than the delinquency rate of high-credit customers (0.48%, 26.427 billion KRW). Kakao Bank also showed a higher delinquency rate for medium- to low-credit customers (1.67%, 1.841 billion KRW) compared to high-credit customers (0.34%, 1.615 billion KRW) by 1.33 percentage points.

The delinquency rate has been rising every year. For K Bank, the pioneer in virtual asset-linked accounts, the rate increased from 0.15% in the first year of service in 2020 to 0.27% in 2021, and jumped to 0.89% last year. Kakao Bank also saw an increase from 0.18% in 2022, when it started its partnership, to 0.58% as of the end of August this year, rising by 0.4 percentage points. If the current trend continues, both companies are expected to record all-time highs by the end of this year.

According to the Act on Reporting and Using Specified Financial Transaction Information, virtual asset exchanges must secure real-name accounts at banks when providing Korean won-based virtual currency trading services domestically. Banks partner with virtual asset exchanges to issue real-name accounts. Investors can deposit money into these accounts or take out loans to invest in virtual assets.

The increase in loan amounts is also notable. The outstanding balance of personal credit loans linked to K Bank’s virtual asset accounts reached 7.0601 trillion KRW as of the end of August, nearly 1 trillion KRW more than the previous year’s 6.2848 trillion KRW. High-credit and medium- to low-credit customers increased by 633.4 billion KRW and 141.8 billion KRW, respectively. Kakao Bank’s loan balance also rose by 169.8 billion KRW to 590.9 billion KRW as of the end of August, up from 421.1 billion KRW last year. The increase in loans linked to virtual asset accounts means that investment funds for virtual assets have grown. This is similar to securities firms lending funds to investors for stock purchases through margin trading.

The problem is that as uncertainty in the virtual asset market grows, the risk of insolvency at internet banks may also increase. If investment sentiment freezes and asset values decline, the number of customers unable to repay loans on time could surge. Lawmaker Kim Hee-gon pointed out, “As the delinquency rate is already rising, an increase in loan amounts will inevitably undermine soundness,” adding, “Measures are needed to reduce dependence on virtual assets.”