Key points
- At the end of June, the credit-loan delinquency rate at Korea's five biggest banks was 0.67% for borrowers 20 and under and 0.59% for those 60 and over. Everyone else averaged 0.35%.
- Overdraft delinquency was highest among the 60-and-over group at 0.37%, then the 20-and-under group at 0.33%, against 0.22% overall. Balances rose 8.5% to 43.3 trillion won ($30.6B USD) while the delinquent amount rose 33.2% to 94.7 billion won ($66.9M USD).
- Margin loans at the 10 largest brokerages rose 45.7% for investors 60 and over in the first half, to 960.8 billion won ($679M USD), and 56.8% for those 70 and over. The rate across all ages was 36.3%.
- Loans secured by Samsung Electronics, SK Hynix, SK Square, Samsung Electronics preferred shares and Samsung Electro-Mechanics stood at 2.9027 trillion won ($2.05B USD) at the end of May, up 24.3% from December. Investors 60 and over held 1.8283 trillion won ($1.29B USD) of it, or 63.0%.
- The Kospi then fell 43.9% from its June intraday high to its July low. The figures come from the Financial Supervisory Service, which prepared them for People Power Party lawmaker Lee Jong-wook.
On August 9, Korea's Financial Supervisory Service (금융감독원) handed a set of loan figures to the office of Lee Jong-wook (이종욱), a People Power Party lawmaker who sits on the National Assembly's Finance and Economy Planning Committee. The figures cover the five biggest banks and the 10 biggest brokerages, and they point at the same two groups of people. The Koreans falling behind on their loans are the youngest borrowers and the oldest ones.
A 28-year-old office worker surnamed Moon is one of them. Moon borrowed 15 million won ($10,600 USD) on an overdraft line early this year and put it into Korean stocks. The stocks fell. The debt stayed exactly where it was.
"When the price was going up, I thought I could pay it back quickly. Right now I can't even sell because of the loss, and the interest just keeps going out," Moon told JoongAng Ilbo (중앙일보). "When my paycheck comes in, I have to fill the overdraft first, so I'm cutting back on seeing people and on eating out."
The delinquency numbers say Moon isn't unusual. At the end of June, borrowers 20 and under were behind on 0.67% of their credit loans and borrowers 60 and over on 0.59%, while the rate across every age was 0.35%. What makes that odd is how little those two groups actually owe. People 20 and under hold 3.6 trillion won ($2.5B USD) of credit loans and people 60 and over hold 10.6 trillion won ($7.5B USD), against 20 to 30 trillion won ($14B to $21B USD) for each of the age groups in between. They borrowed the least and they're missing the most payments.
Yang Jun-sok (양준석), a professor of economics at the Catholic University of Korea (가톨릭대학교), said the makeup of those two groups explains it.
"More borrowers took on debt to invest in the first half of this year expecting the market to rise, and among people 20 and under and 60 and over there are many who are just starting out and many who are retired, so their income and their ability to repay can be relatively weak," Yang said. "With prices falling sharply lately, there's a chance their investment losses and their repayment burden both get bigger."
The loans with Samsung and SK Hynix behind them
The brokerage side of the data is where the older group really stands out. Margin loans, meaning money borrowed from a brokerage to buy shares, rose 36.3% across all ages in the first half of this year. For investors 60 and over they rose 45.7%, and for investors 70 and over they rose 56.8%. The 60-and-over group alone accounted for 35.8% of the total increase.
Then there's the other kind of borrowing, where an investor puts up shares already owned as collateral. At the 10 largest brokerages, loans backed by the five most valuable stocks on the Kospi came to 2.9027 trillion won ($2.05B USD) at the end of May, 24.3% more than at the end of last year. Investors 60 and over held 1.8283 trillion won ($1.29B USD) of that, which is 63.0% of the whole thing. Investors in their 50s held 20.4% and everyone under 50 held the rest.
The five stocks are Samsung Electronics, SK Hynix, SK Square, Samsung Electronics preferred shares and Samsung Electro-Mechanics. Four of the five are memory chip businesses or holding companies built around one. Those are the shares that were pledged, and they're the ones that fell hardest when the Kospi dropped 43.9% from its June intraday high to its July low.
A stock-collateral loan doesn't wait for the borrower to decide anything. When the collateral loses value, the brokerage asks for more cash or more shares to keep the ratio where it needs to be, and if that doesn't arrive, it sells the pledged shares itself and takes the money back. Korea has already been through a heavy stretch of that this summer, which we covered in July.
"If older investors borrowed against the shares they held and put that money into stocks again, then falling prices and missed payments come together and even the collateral shares get sold off, so the loss can grow," Yang said.
The Bank of Korea (한국은행) had already put this in writing. Its report in June landed before the worst of the selling.
"Individual leveraged investment has expanded greatly, centered on margin loans and stock-collateral loans, which are the brokerages' medium and long term credit and loan products, and has reached the largest scale on record," the report said.
Meanwhile, the brokerages lending all this money had to fund it somewhere. Through August 7, Korean brokerages had issued 723.9 trillion won ($511B USD) of commercial paper and electronic short-term bonds this year, 170.4% more than the same stretch of last year, with most of that increase in paper that matures in five days or less. That borrowing climbed hardest in May and June, when trading was busiest, and it fell sharply in July.
Sources
- 중앙일보, "마통 갚기도 벅차" 빚투 후폭풍…2060이 가장 위험하다, on the delinquency rates by age, the Moon and Yang Jun-sok quotes, and the brokerages' short-term funding
- 서울경제, "평생 모은 돈, 삼전닉스만 믿었는데"…주식 담보로 돈 빌린 고령층 '피눈물', on the five collateral stocks, the 63% concentration and the Bank of Korea report
- Our earlier coverage: how Korean overdraft borrowing grows faster on crash days than rally days and the argument over how many accounts were force-sold
Won figures are converted at 1,416 won to the dollar, the August 7, 2026 rate. Quotes and figures are translated from Korean reporting. This article is for information only and is not investment advice.
