Household lending posts biggest monthly jump in 21 months in May
Credit loans surge on stock market boom, led by overdraft accounts
Financial regulator activates emergency management regime
Banks move in lockstep to tighten credit lending
Financial regulators have activated an emergency management regime after household lending surged, driven by credit loans taken out to invest in the booming stock market. With mortgage lending already under tight restrictions, unsecured credit loans had remained a regulatory blind spot, and their sudden acceleration has caught authorities off guard. Regulators said they will summon financial institutions that miss household lending targets for intensive weekly reviews, effective immediately.
Under government pressure, banks moved quickly to tighten credit lending. They will cap credit loan limits for high earners at 100 million won (about $65,500) and restrict the daily volume of non-face-to-face credit loan applications. Banks will also strengthen reductions on unused credit limits when overdraft accounts come up for renewal.
The Financial Services Commission said Friday that household lending across all financial sectors rose by 9.3 trillion won in May, a preliminary estimate. That was roughly 2.7 times the 3.5 trillion won increase recorded in April and the largest monthly gain since August 2024, when lending climbed 9.7 trillion won — a span of one year and nine months.
The FSC noted that non-mortgage lending, including credit loans, grew by a wider margin than mortgage loans — a reversal of the usual pattern. Other loans, which had fallen 2 trillion won in April, swung to a 5.3 trillion won increase in May. Credit loans, led by overdraft accounts, jumped 3.4 trillion won in a single month. Mortgage lending rose 4 trillion won over the same period, 1.5 trillion won less than the previous month's gain.
Analysts attributed the surge to an explosion in borrowing demand from retail investors seeking to ride the stock market rally that pushed the Kospi to just below the 9,000 mark.
The scale of the increase prompted regulators to express direct concern about the rise in credit lending — a marked shift from their earlier assessment that debt-fueled investing remained manageable. Authorities now view the situation as an emergency in which credit loans threaten the overall health of household debt. They also warned that excessive leveraged investing could amplify share price volatility and heighten financial risk for retail investors.
Banks began rolling out countermeasures in response to regulatory pressure. Hana Bank moved Friday to cap credit loan limits for high earners, setting a maximum of 100 million won per individual regardless of annual income for new credit loan applications.
Hana Bank will also tighten reductions on unused overdraft limits at renewal. The bank had previously allowed certain product-specific exceptions when cutting limits on accounts with unused capacity at maturity — it now plans to eliminate those exceptions entirely.
Shinhan Bank said it will restrict non-face-to-face credit loan applications starting June 15 when combined daily intake across face-to-face and non-face-to-face channels exceeds its internal management threshold. Products designed to support financially vulnerable customers will be exempt from the restriction.
Shinhan will also reduce limits by up to 20 percent at renewal on overdraft accounts where utilization has stayed below 10 percent in the three months before the contract term or maturity date. The measure applies to loans with a contracted amount exceeding 30 million won.
Woori Bank suspended non-face-to-face applications for credit loan refinancing products Friday and will also block new household credit loan applications submitted through loan comparison platforms such as Banksalad and Finda.
NH NongHyup Bank has already raised mortgage interest rates and tightened mortgage guarantee eligibility as part of broader lending controls, and is currently limiting daily volumes for credit loans, jeonse loans and mortgage loans through non-face-to-face channels. Starting June 15, the bank plans to cut preferential interest rates on credit loans by 0.1 percentage point and on mortgage loans by 0.2 percentage point.
KB Kookmin Bank and Kakao Bank are also reviewing related measures. With the government calling for strong self-regulation and the risk that tightening at one bank will push demand to others, the remaining banks are expected to act quickly. Anticipated steps include reducing new credit loan limits for high earners and waiving early repayment fees to encourage borrowers to pay down existing credit loans.
A senior lending executive at a major commercial bank said that while defining a "high earner" threshold is difficult given the large bonuses being paid out these days, the broad direction of the response is clearly to reduce credit loan limits.
A Financial Services Commission official said the situation is being treated with considerable gravity because it is unusual for household lending to exceed projections due to a rise in non-mortgage credit loans rather than mortgage loans. "We will maintain the emergency management regime until credit loan growth stabilizes by a significant margin," the official said.
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