South Korea sees surge in 'Ma-tong' debt; defaults rise among young and elderly investors

South Korea's five major commercial banks have seen a significant increase in the outstanding balance of their minus-one accounts, commonly known as 'Ma-tong,' with a rise of over 3 trillion won since the end of last year. This surge is accompanied by growing concerns over the financial health of younger and elderly borrowers who have apparently leveraged these credit lines for investment, a practice known as 'bit-tu' (borrowing to invest).

Data from the Financial Supervisory Service reveals that as of the end of June, the total balance for these accounts across KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks reached 43.3 trillion won. This marks an 8.5% increase from 39.9 trillion won at the end of last year and is the highest level in three years and eight months, since October 2022. Concurrently, the amount of overdue payments on these accounts has jumped by 33.2% to 94.7 billion won from 71.1 billion won at the end of last year. The rate of increase in defaults has outpaced the growth in the overall balance.

Analysis by age group highlights a particularly high default rate among borrowers aged 60 and above, standing at 0.37% at the end of June, which is 1.7 times the overall average of 0.22%. Young borrowers under 20 also exhibit a significantly elevated default rate of 0.33%, 1.5 times the average. The speed at which defaults are increasing is most pronounced among the under-20 demographic, whose overdue payments have more than doubled in the past two years.

Bank officials attribute the rise in defaults, especially among younger and older borrowers, to the recent downturn in the stock market. The Korea Composite Stock Price Index (KOSPI) experienced a sharp decline after hitting a record high in June. Some analysts suggest that investors who borrowed money for stock investments are delaying repayment, hoping for a market rebound. Professor Kang In-soo of Sookmyung Women's University's economics department noted that while bank credit loans are typically based on employment and creditworthiness, making them less immediately susceptible to market fluctuations, income reductions for young job seekers and retirees could contribute to increased defaults.

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Bank credit loans are executed based on employment status and creditworthiness, so it is difficult for the impact of stock market declines to appear immediately. However, defaults may increase in conjunction with income reductions for early career individuals and retirees who have relatively insufficient repayment capacity.