News / Korea / yonhap_finance
South Korean Banks See Non-Performing Loans Hit 8-Year High
Finance · Major Banks · yonhap_finance · 2026-09-01
Non-performing loans at South Korean banks reached 18.9 trillion won in June, marking an eight-year peak driven primarily by corporate debt defaults.
What Happened
Surge in Bad Debt: As of the end of June, non-performing loans (NPLs) at domestic banks in South Korea climbed to 18.9 trillion won, the highest level recorded since June 2018. The NPL ratio rose by 0.03 percentage points from the previous quarter to reach 0.63%.
Corporate Sector Impact: The increase was largely driven by corporate lending, which accounted for 15.2 trillion won of the total bad debt. Small and medium-sized enterprises (SMEs) were the primary contributors to this rise, with new NPLs in that segment increasing by 1.2 trillion won.
Asset Quality Metrics: The NPL ratio for corporate loans reached 0.77%, the highest since March 2021, while the household loan NPL ratio also saw a slight uptick to 0.33%. Furthermore, the loan loss reserve ratio dropped to 142.9%, reflecting a decline in the buffer against potential credit losses.
Regulatory Outlook: The Financial Supervisory Service noted that while the overall soundness of the banking sector remains stable, proactive management is necessary. Regulators cited ongoing geopolitical tensions in the Middle East and potential interest rate volatility as key factors requiring vigilant risk oversight.