'Debt-Financed Investment' Warning for Young and Elderly... Overdraft Account Delinquency Rate at Five Major Banks Hits 0.22%

0.33% Delinquency Rate for Those in Their 20s and Younger,
0.37% for Those in Their 60s and Older
Overdraft Balances Up 8.5%, Delinquent Amounts Surge 33.2%

As so-called "debt-financed investment"―the use of loans for stock market investment―spreads, the delinquency rate of overdraft accounts at the five major banks has been found to increase. In particular, the delinquency rates among borrowers in their 20s and younger, as well as those in their 60s and older, surpassed the overall average.

On August 9, Yonhap News reported this, citing data submitted by Rep. Lee Jongwook of the People Power Party, who is a member of the National Assembly's Planning and Finance Committee, based on materials provided by the Financial Supervisory Service.

According to the data, as of the end of June this year, the delinquency rate on individual credit line loans―so-called overdraft accounts―at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) was 0.22%. This figure represents a 0.04 percentage point increase from the end of last year, when it was 0.18%.

As the use of loans to invest in stocks has become more frequent, the delinquency rate on overdraft accounts at the five major banks has risen. Photo by Yonhap News Agency

The concerning point is that the pace of increase in delinquent amounts has outstripped the pace of growth in loan balances. The outstanding balance of overdraft accounts at the five banks rose by 8.5%, from 39.9 trillion won at the end of last year to 43.3 trillion won as of the end of June this year. During this same period, the amount in arrears surged by 33.2%, from 71.1 billion won to 94.7 billion won.

By age group, delinquency rates were especially pronounced among the young and the elderly. Among borrowers in their 20s and younger, the delinquency rate for overdraft accounts stood at 0.33%, 0.11 percentage points higher than the overall average. For those in their 60s and older, the rate was 0.37%, 0.15 percentage points above the average. In contrast, the rate was relatively lower for those in their 30s and 40s, at 0.19%, and for those in their 50s, at 0.21%.

For the younger age group, even though the overall loan amount was not large, the increase in delinquencies was especially steep. While the overdraft account balance for those in their 20s and younger remained roughly unchanged at about 1 trillion won compared to the end of last year, the amount in arrears jumped by 32%, from 2.5 billion won to 3.3 billion won. For those in their 60s and older, the balance increased from 4 trillion won to 4.5 trillion won, and the delinquent amount rose by 23%, from 13.5 billion won to 16.6 billion won.

A similar trend was observed for general unsecured loans. The delinquency rate for unsecured loans at the five major banks was 0.35% as of the end of June, up 0.05 percentage points from the end of last year. In particular, delinquency rates among those in their 20s and younger stood at 0.67%, and among those 60 and older at 0.59%—both far above the overall average.

One key factor behind the recent increase in overdraft account balances is believed to be rising investment demand resulting from a bullish stock market. However, as stock prices have undergone corrections, concerns have emerged that borrowers who invested using loans may be facing increased losses and heavier interest burdens.

Rep. Lee Jongwook noted, "The payment notice for debt-financed investment driven by stock market overheating is arriving first for the young and the elderly. This is a warning signal that such investments may not merely lead to investment losses, but could also spiral into household debt insolvency."

This content was produced with the assistance of AI translation services.