Households and businesses that are suffering from life and business difficulties in the aftermath of Corona 19 have been borrowing money, and loans from real estate and stock investments overlapped, and the debt of the private sector (households and companies) far exceeded twice the size of the country's economy.



The ratio of household debt to income is also soaring to the highest level, which is feared that it will impede future consumption recovery.



According to the'Financial Stability Situation (September 2020)' report released by the Bank of Korea today (24th), as of the end of the second quarter, the private sector's credit (household and corporate debt) was 206.2 of the nominal gross domestic product (GDP). It was counted as %.



This is a 5.2 percentage point jump in just three months from the end of the first quarter (201%), and is the highest level since 1975 when related statistics were started.



First of all, looking at household credit, household debt as of the end of the second quarter was KRW 1637 trillion, up 5.2% from a year ago.




Mortgage and other loans (including credit loans) increased by 6.4% and 3.9%, respectively.



In addition, the BOK added in the report, "The housing transaction volume has increased since June, and housing related loans and other loans (including credit loans) have increased significantly."



As of the end of August, housing-related loans and other loans surged KRW 15.4 trillion and KRW 17.8 trillion from the end of May, respectively, which is 81.2% and 93.3% higher than the increase in the same period last year.



As household debt is growing rapidly, disposable income increased by only 0.7% from the end of the second quarter of last year, increasing the ratio of household debt to disposable income to 166.5%.



This is the highest record since the fourth quarter of 2002 when statistics began to be created.




The BOK said, "There is a high possibility that households' debt repayment ability declined due to the decline in sales of self-employed persons and worsening employment conditions, but credit risk has not yet been made current due to various financial support measures such as delay in repayment of principal and interest. If you do, you need to be aware of the possibility that household debt insolvency will increase, centering on vulnerable households.”



Corporate credit was estimated at 279 trillion won as of the end of the second quarter.



This is an increase of 9.6% compared to the same period last year (KRW 1897 trillion), the highest growth rate since the third quarter of 2009 (11.3%).



The BOK said, "If the economic recovery at home and abroad is delayed due to the prolonged Corona 19, there is a high possibility that the credit risk of companies will increase in the future."



Even with such a surge in private loans, the BOK evaluated that the bank's asset quality is still in good shape.



As of the end of June, the ratio of'less than fixed' loans at commercial banks was 0.71%, which was rather down from the same point last year (0.91%).



However, the profitability of the bank has deteriorated as the total return on assets (ROA) fell 0.16% points from 0.65% (annual rate) in the first half of last year to 0.49% in the first half of this year.



(Photo = Courtesy of the Bank of Korea, Yonhap News)