Bank Private Loans 37 Percent Jump, Delinquent Credit at All Time High 2, 750, 000

With recent emphasis on loans to households rather than corporations, banks reported that there was a 37 percent increase in loans from last year. Moreover, credit card spending and late fees have soared with number of people with bad credit at an all time high of 2, 750, 000. Experts report that 12 out of 100 people active in the economy have delinquent credit and that the possibility of credit crisis cannot be discounted.

On August 15, the Financial Supervisory Service (FSS) and Korea Bank reported that, as of late June, bank corporate loans cost 199 trillion and 9464 billion won, an increase of 6.0 percent from last year (188 trillion and 5518 billion won). Household loans, however, amounted to 123 trillion and 5719 billion won which is a 37 percent increase from last year (90 trillion 4839 billion won). Mortgage loan increase stopped at 15 percent (26 trillion 1594 billion) whereas car loan increase shot up to 44 percent (97 trillion 4125 billion won).

Head of FSS Bank Management Analysis Team, Choi Tae Mun said, ``Household loans are skyrocketing because banks have put their energy into retail banking, targeting private households which have increased their level of spending.``

Specially, short-term loans through credit cards totaled 30 trillion and 4358 billion won at the end of June, marking a 57 percent increase. Cash advance services totaled 13 trillion and 4530 billion won and rose 53 percent from last year.

Correspondingly, credit card late fees rose from last year`s 7.7 percent to 8.8 percent this June. People who could not pay the credit companies on time and got penalized with restrictions on financial transactions numbered 2, 755, 962 (corporations and private individuals combined), 12 percent of the 22, 920, 000 economically active people. In spite of the government’s active credit pardon policy, the numbers indicate 400, 000 more people with credit problems than last March.

Korea Bank stated, ``Credit card use has doubled from last year, the number of people with delinquent credit due to inability to make payments number in the 40 percent, and credit card use is continuing to rise as a result of such increase in delinquency.``

Samsung Economic Research Institute`s Kim Kyong Won said, ``If the economy fails to recover as money lending institutions continue to target private households, there is the possibility that the number of delinquent credit holders may exponentially increase.``

Lee Hoon dreamland@donga.com