May Personal Business Loan Delinquency Rate at 0.69%
Highest Since November 2014 (0.72%)
Nearly 1 Million Self-Employed Closures Last Year
As high interest rates persist and the economic downturn continues, the number of self-employed individuals struggling with debt has increased, causing the delinquency rate on personal business loans to reach its highest level in 9 years and 6 months.
According to the Financial Supervisory Service on the 16th, as of the end of May, the delinquency rate on won-denominated loans at domestic banks (based on principal and interest overdue by more than one month) was 0.51%, up 0.03 percentage points from the previous month (0.48%). Compared to the same period last year (0.40%), it rose by 0.11 percentage points. New delinquencies amounted to 2.7 trillion won, an increase of 100 billion won from the previous month (2.6 trillion won). The amount of delinquent loans resolved was 2 trillion won, up 500 billion won from the previous month (1.5 trillion won). The new delinquency rate remained unchanged at 0.12% from the previous month.
By sector, the delinquency rate on corporate loans rose 0.04 percentage points from the previous month (0.54%) to 0.58%. Compared to the same period last year, it increased by 0.15 percentage points. The delinquency rate on large corporate loans (0.05%) decreased by 0.06 percentage points from the previous month (0.11%), while the delinquency rate on small and medium-sized enterprise (SME) loans (0.72%) rose by 0.06 percentage points from the previous month (0.66%).
Among SME loans, the delinquency rate on personal business loans increased by 0.08 percentage points from the previous month to 0.69%, and by 0.24 percentage points compared to the same period last year. This is the highest figure in 9 years and 6 months since November 2014 (0.72%). With nearly one million self-employed individuals having closed their businesses last year, marking a record high, the delinquency rate among the self-employed appears to be rising sharply. The delinquency rate for small and medium-sized corporations was 0.75%, up 0.05 percentage points from the previous month and 0.2 percentage points from the same period last year.
The delinquency rate on household loans was 0.42%, up 0.02 percentage points from the previous month (0.4%) and 0.05 percentage points compared to the same period last year (0.37%). The delinquency rate on mortgage loans (0.27%) increased by 0.01 percentage points from the previous month and 0.04 percentage points from the same period last year. The delinquency rate on household loans excluding mortgage loans, such as unsecured loans, was 0.85%, up 0.06 percentage points from the previous month and 0.1 percentage points from the same period last year.
A Financial Supervisory Service official explained, "Although the delinquency rate at domestic banks continues to rise, the rate of increase has somewhat slowed compared to April." He added, "The bank delinquency rate is still lower than the long-term average before COVID-19, and banks' loss absorption capacity has significantly improved compared to the past." The Financial Supervisory Service plans to activate debt restructuring for vulnerable borrowers in preparation for the possibility of continued delinquency rate increases and to encourage banks to actively resolve delinquent loans and increase provisions for loan losses.
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