KOSPI Plunge Drives Balance on Five Major Banks' Overdraft Accounts to 44.2 Trillion Won
As stock prices fell sharply, the amount individuals have borrowed from banks hit its highest level in about four years. The surge reflects increased 'debt investment' by retail investors looking to buy stocks at bargain prices, combined with year-end withdrawals for living expenses. According to the financial industry on the 15th, the outstanding balance of overdraft accounts at five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 44.2632 trillion won as of the 12th, the highest since the end of August 2022 (44.7699 trillion won), or in 4 years and 3 months. The balance has grown by 668.2 billion won (1.5%) since the end of last month, exceeding the increase for the entire month of October (611.5 billion won).
This year's movement in overdraft balances has tracked the stock market. The balance at the five banks, which stood at 39.738 trillion won at the end of January, stayed in the 39-trillion-won range through the end of April, then swelled by nearly 3.7 trillion won over May and June on debt-investment demand driven by the KOSPI's sharp rally. It turned downward in August and September, but reversed to growth again starting in October.
The utilization rate of overdraft accounts — the ratio of actual usage to committed credit limits — is also climbing steeply, aimed at bargain hunting. At one bank, the rate rose from 43.0% at the end of last year to 47.3% at the end of last month and 48.0% as of the 12th. Another bank's rate rose over the same period from 40.2% to 45.1% and then 46.1%.
The magnitude of the balance increase stemmed from the stock market correction. The KOSPI, based on closing prices, fell from 6,012.44 on the 28th of last month to 5,730.74 in just two days, then plunged to 5,018.85 on the 9th of this month, and is now moving in the 5,200–5,300 range. Year-end factors also played a role. Banks typically tighten household lending standards toward the end of the year, making new loans harder to obtain. The financial industry estimates that rising prices and economic polarization have added demand for withdrawing living expenses from overdraft accounts.
Interest rates rose over the same period. According to the Korea Federation of Banks, the simple average interest rate on credit-line loans at the five banks, based on new loans extended in September, reached an annual 5.48%. After rising from an annual 4.97% in June to 5.01% in July, the rate climbed by another 0.16 percentage points in August and 0.31 percentage points in September, with the pace of increase accelerating.
Money also flowed into deposits over the same period. The balance of time deposits at the five banks stood at 1,046.196 trillion won as of the 12th, up 15.708 trillion won from the end of last month. The growth trend has continued following a 24.4009-trillion-won increase during October alone, extending a second-half streak that included gains of 35.5401 trillion won in July, 20.292 trillion won in August and 855.2 billion won in September.
