Credit card delinquencies hit 11-year high amid economic slowdown

Delinquency rates at Korea’s major credit card companies hit an 11-year high in the first quarter amid an economic slowdown, the central bank said Thursday.

The delinquency rate on loan assets at the major card firms came to 2.3 percent as of end-March, the highest since 2014, according to the report by the Bank of Korea (BOK).

The loan assets include card loans, revolving credit and cash advances, as well as non-card loans, such as project financing (PF) and corporate loans.

The delinquency rate on non-card loans, mostly composed of corporate lending, in particular, has gone up sharply in recent years, reaching 3 percent in the second quarter of this year, the BOK said.

The rise came as the recovery in domestic demand has been delayed, which pushed up delinquency rates in such vulnerable sectors as wholesale and retail, as well as accommodation and food services.

Increasing defaults in real estate project financing (PF) also drove up delinquency rates in the construction and real estate sectors, it added.

“Borrowers’ vulnerability to economic conditions has increased, particularly in card loans,” the BOK said in the report. “Given the heightened risks of additional defaults, close attention needs to be paid to asset soundness, and monitoring needs to be stepped up.”