Banks in South Korea are swiftly taking action to control a rise in credit loans driven by customers borrowing money for stock investments. Major lenders like Hana and Shinhan have tightened their criteria and limits on credit loans following pressure from the country’s financial regulators. This move comes as household loans from banks saw the fastest growth in nearly two years in May, with lending associated with stock investments increasing during a market upswing.
Outstanding household loans from banks surged by 6.9 trillion won (US$4.5 billion) to reach 1,181.8 trillion won in the previous month, showing an acceleration from the 2.1 trillion-won increase in the month before, as per data from the Bank of Korea (BOK). This growth marked the most significant monthly increase since August 2024, when household loans rose by 9.2 trillion won from the previous month. Mortgage loans also saw a rise of 3.2 trillion won in May compared to a 2.7 trillion-won increase in April.
Additionally, unsecured and other household loans increased by 3.7 trillion won in May, rebounding from a 600 billion won decrease the month prior. This rise represents the largest surge since April 2021 when such loans grew by 11.8 trillion won. The central bank attributed this growth to the escalating individual investments in the flourishing stock market, particularly in non-mortgage loans.
The surge in individual investments in the stock market was fueled by the Korea Composite Stock Price Index’s robust performance in May, driven by substantial gains in semiconductor shares, pushing the index to the 8,400-point level from 6,500. Concurrently, Seoul stocks were trading significantly higher, with optimism fueled by U.S. President Donald Trump’s statements hinting at a resolution to the Iran conflict. The benchmark Korea Composite Stock Price Index (KOSPI) surged by 606.46 points, or 7.81 percent, reaching 8,370.41 by 11:20 a.m., maintaining levels above 8,000 as institutional and foreign investors showed interest in blue-chip tech stocks.
