Delinquent debts at Korean savings banks hit near 7-yr high

[Photo by MK DB]

Savings banks in South Korea report a growing number of debt defaults as surging inflation hits debt-ridden individuals amid a sharp rise in interest rates that has led to the housing market slump.

According to data from Korea Deposit Insurance Corp. on Thursday, the delinquency rate at nationwide savings banks recorded 3.0 percent at the end of September last year, up 0.4 percentage point from the previous quarter. The overdue amount was 3.43 trillion won ($2.7 billion), an increase of more than 400 billion won compared to the second quarter of the same year.

It is the first time in about six years since June 2016 that the combined delinquencies at 79 savings banks exceeded 3 trillion won. The delinquency rate stayed at 2.6 percent in the first and second quarters of last year but rose sharply in the third quarter.

The default rate stood out at small and medium-sized savings banks with total assets of around 1 trillion won. About 40 percent, or 32 out of 79 savings banks across the country, saw their delinquency rate rise in the third quarter of last year versus the previous quarter, and seven banks showed an increase of more than 1 percentage point. Of these, six banks had a delinquency rate of more than 3 percent, higher than the national average.

Industry experts warn of growing financial risk at savings banks in the first half of this year as their delinquency rate should have continued to rise in the fourth quarter last year.