Savings bank delinquency rate for self-employed borrowers reached 11.70%, the highest in 10 years
Credit card & capital firm delinquency rate hit 3.67%, highest since 2014
Bank sector delinquency rate recorded at 0.60%, highest since 2014
56.5% of self-employed borrowers are multi-loan holders, accounting for 70.4% of total self-employed loans
Average debt per multi-loan self-employed borrower stands at KRW 430 million, highest since 2021
Opinion
The prolonged downturn is intensifying self-employed loan defaults, and the rising proportion of multi-loan borrowers is significantly increasing the credit risk facing South Korea's financial sector.
Core Sell Point
The sharp rise in self-employed loan delinquency is emerging as a systemic risk factor for the broader financial sector.
As the prolonged economic downturn and sluggish domestic demand persist, the loan delinquency problem among South Korea’s self-employed is worsening. In particular, rising numbers of financially strained self-employed borrowers have driven delinquency rates in the secondary lending sector to their highest level in a decade.
According to the Bank of Korea, the delinquency rate for personal business loans at savings banks (based on loans overdue by one month or more) reached 11.70% at the end of last year, up 0.70 percentage points from the previous quarter. This is the highest level since Q2 2015 (11.87%) and represents a sharp rise of 4.07 percentage points from a year earlier (7.63%). Delinquency rates at credit card companies and capital firms also climbed to 3.67%, marking the highest level in 10 years and 6 months since 2014.
Even in the banking sector, delinquency rates remain elevated, recording 0.60%, the highest since 2014. Moreover, both the proportion and total debt of self-employed borrowers with multiple loans continue to rise, signaling a growing risk of further defaults. As of the end of last year, 56.5% of all self-employed borrowers had multiple loans, accounting for 70.4% of the total outstanding self-employed loans.
The average debt held by multi-loan self-employed borrowers stood at KRW 430 million, the highest since Q4 2021. With self-employed loan defaults likely to trigger a broader credit risk across the financial system, risk management within the financial markets is becoming increasingly critical.
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