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South Korean Corporate Finance Over-Reliant on Banks, Report Finds
Finance · Major Banks · yonhap_finance · 2026-08-25
A new report highlights the high dependency of South Korean firms on bank loans, urging for the diversification of funding channels and financial management.
What Happened
High Bank Dependency: South Korean corporations remain heavily reliant on bank loans for their financing needs, with such debt accounting for 84.7% of total corporate liabilities as of late 2025. Small and medium-sized enterprises are particularly vulnerable, sourcing over 90% of their financial liabilities from banks.
Global Comparison: Unlike the U.S., where market-based debt exceeds 60% of corporate liabilities, South Korea's financial system remains deeply rooted in bank-centric lending. Similarly, Germany shows a lower reliance on bank loans at 30%, supported by active inter-corporate lending practices that are currently lacking in Korea.
Inefficiency in Capital Management: The current reliance on short-term bank deposits for corporate cash management, combined with strict collateral requirements for loans, limits financial efficiency. The report suggests that the existing structure fails to optimize the deployment of corporate capital.
Call for Diversification: Experts recommend diversifying funding channels by encouraging firms to utilize securities firms and capital markets. Expanding access to non-bank financial services is deemed essential for timely and efficient capital supply for domestic businesses.