South Korea's 'Debt-to-Invest' Trend Continues as Minus-Account Balances Rise Sharply

South Korea is witnessing a persistent surge in "debt-to-invest" (bitu) activity, even as banks move to restrict credit lines and limit new applications for overdraft accounts, commonly known as minus accounts. The combined balance of these accounts across five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached 43.3363 trillion won as of May 25, marking the highest level in three years and eight months.

In May alone, the balance increased by 1.865 trillion won, followed by another 1.8039 trillion won increase in the first 25 days of June. This trend is largely attributed to the volatility in the stock market, with the KOSPI index fluctuating significantly. Investors are increasingly turning to existing minus accounts to secure short-term liquidity for their investments. The utilization rate, which measures the portion of the credit limit actually drawn, has climbed to an average of 44.8% across the five banks, the highest since the pandemic era.

The demand for borrowed funds is not confined to the banking sector. Insurance companies and credit card firms are also experiencing a rise in loan demand. In June, major banks saw household loan increases of 3.7 trillion won, while specialized financial companies added 700 billion won, and insurance firms 600 billion won. The outstanding balance of insurance policy loans from five major non-life insurers and three life insurers rose by 522.7 billion won in May. Similarly, credit card loans from nine major card companies hit a record high last month.

In response to this growing trend, the Financial Services Commission has already convened meetings with banking and insurance sectors and plans to summon specialized financial companies soon. The aim is to manage the increasing household debt fueled by investment borrowing and to maintain financial stability.