The delinquency rate on won-denominated loans at South Korean banks fell 0.11 percentage points in a month in June, influenced by expanded end-quarter bad-loan disposals. The rate remains high versus a year earlier, and the Financial Supervisory Service is also watching for a possible rebound.

The delinquency rate on won-denominated loans at South Korean banks stood at 0.56 percent at end-June, down 0.11 percentage points from 0.67 percent at end-May, the Financial Supervisory Service said on Aug. 21 in data on the status of won loan delinquency rates at domestic banks as of end-June 2026. It was up 0.04 percentage points from 0.52 percent a year earlier.

Newly delinquent loans in June totalled 2.6 trillion won, down 700 billion won from 3.3 trillion won the previous month. Over the same period, bad-loan disposals rose 3.8 trillion won to 5.3 trillion won from 1.5 trillion won. The outstanding balance of delinquent loans fell by 2.7 trillion won in a month.

The new delinquency rate also fell. The June new delinquency rate was 0.10 percent, down 0.03 percentage points from 0.13 percent the previous month, and 0.01 percentage points lower than 0.11 percent a year earlier.

By segment, the delinquency rate on corporate loans was 0.68 percent, down 0.16 percentage points from 0.84 percent at end-May. It was 0.08 percentage points higher than 0.60 percent a year earlier.

The delinquency rate on loans to large companies was 0.22 percent, down 0.05 percentage points from a month earlier but up 0.08 percentage points from a year earlier. The delinquency rate on loans to small and medium-sized enterprises was 0.82 percent, down 0.18 percentage points from a month earlier but 0.08 percentage points higher than a year earlier.

The delinquency rate on loans to small and medium-sized corporations was 0.92 percent, down 0.19 percentage points from 1.11 percent the previous month but up 0.13 percentage points from a year earlier. The delinquency rate on loans to self-employed borrowers was 0.69 percent, down 0.15 percentage points from a month earlier and 0.03 percentage points higher than a year earlier.

The delinquency rate on household loans was 0.40 percent, down 0.05 percentage points from 0.45 percent at end-May. It was 0.01 percentage points lower than 0.41 percent a year earlier. The delinquency rate on mortgage loans was 0.28 percent, down 0.03 percentage points from a month earlier, while the delinquency rate on household loans excluding mortgages, such as credit loans, fell 0.13 percentage points to 0.77 percent.

The regulator assessed that the sharp fall in June delinquency rates was influenced by the banking sector expanding write-offs and sales of delinquent loans at quarter-end. The scale of bad-loan disposals rose to 5.3 trillion won in June from 1.6 trillion won in April and 1.5 trillion won in May. Banks' delinquency rates typically rise during a quarter and then fall at quarter-end as bad loans are disposed of.

The Financial Supervisory Service said, "Considering the uncertainty in economic conditions, including a global trend of rising interest rates and the prolonged Middle East situation, there is a possibility that delinquency rates could rise again in the future." It added, "While monitoring the soundness of the banking sector, we plan to encourage banks to strengthen loss-absorption capacity and to write off and sell bad loans."