Domestic financial institutions are expected to strengthen loan screening centered on household loans in the third quarter of this year.

However, while credit risks for both corporations and households are expected to rise simultaneously, loan demand is anticipated to diverge between corporate and household mortgage loans, according to the survey.

According to the "Financial Institution Lending Attitude Survey Results" announced by the Bank of Korea on the 20th, domestic banks are expected to continue their household debt management stance in the third quarter of 2026, raising the bar for both housing-related loans and unsecured personal loans.

Non-bank financial institutions are also expected to maintain a conservative lending posture across most sectors except credit card companies.

▲ Strengthening Screening Focused on Household Loans

The comprehensive loan attitude index for domestic banks in the third quarter is expected to be -7. A negative index means more financial institutions responded that they would strengthen lending rather than ease it.

The loan attitude index for large corporations and small-to-medium enterprises (SMEs) each came in at 0, suggesting they will maintain the previous quarter's level.

Meanwhile, the household mortgage loan attitude index is projected at -11, and general household loans at -14, indicating that loan screening for the household sector will be relatively tightened.

Banks raising the bar centered on household loans is analyzed as a result of continued policy pressure to manage the growth in household debt.

With the management target expanding from mortgage loans to include unsecured loans and overdraft accounts, the possibility of stricter screening of borrowers' income and repayment capacity has increased.

▲ Corporate and Household Credit Risks Rising Together

The comprehensive credit risk index for domestic banks in the third quarter is projected at 22.

Large corporations scored 8, SMEs 25, and households 19, with credit risks increasing across all borrower categories.

In particular, credit risk for SMEs was assessed as relatively high.

The delinquency rate for domestic banks' SME loans rose from 0.72% in December 2025 to 0.81% in March 2026 and 1.00% in May.

During the same period, the overall corporate delinquency rate also increased from 0.59% to 0.84%.

It is analyzed that external uncertainties including Middle East tensions and delayed domestic demand recovery have pressured SMEs' profitability and cash flow.

There is also a possibility that if raw material prices and financial costs increase simultaneously, delinquencies and defaults could expand, particularly among marginal enterprises.

Household credit risks are also expected to increase, reflecting concerns about vulnerable borrowers' diminished debt repayment capacity.

It was analyzed that if loan interest rate burdens continue while income conditions fail to improve sufficiently, the burden of principal and interest repayment for low-income and low-credit borrowers could increase further.

▲ Rising Corporate Loan Demand…Moves to Secure Liquidity

The comprehensive loan demand index for domestic banks in the third quarter is projected at 17. Large corporations scored 6 and SMEs 25, indicating that corporate loan demand will increase.

It is analyzed that companies are proactively securing operating funds and liquidity in preparation for internal and external uncertainties.

Rising corporate bond rates also acted as a factor raising bank loan demand.

According to the Bank of Korea, the corporate bond rate for AA- rated 3-year bonds rose from 3.46% at the beginning of the year to 4.38% at the end of June.

As market-based financing costs increased, more companies are turning to relatively stable bank loans.

The higher loan demand index for SMEs compared to large corporations is analyzed as SMEs have difficulty accessing direct financing markets such as corporate bonds and commercial papers.

There is an increased possibility that operating fund demand in response to sluggish sales and rising costs could lead to increased bank borrowing.

Loans (Photo: [Courtesy of Yonhapnews])

▲ Household Mortgage Loans Decline While Unsecured Loans Increase

Household loan demand diverged depending on the purpose of funds.

The household mortgage loan demand index is projected at -6, expected to decline, while the general household loan demand index came in at 14, suggesting continued growth.

Housing-related loans such as mortgage loans and jeonse (long-term rental) loans were affected by strengthened regulations and rising interest rates.

Reduced loan limits and increased interest burdens are analyzed as constraining demand for home purchase and rental funds.

Conversely, general loans such as unsecured loans and overdraft accounts are expected to increase centered on living expenses and stock investment fund demand.

This shows that households have increasingly turned to borrowing to supplement living expenses or secure short-term investment funds rather than for home purchases.

As general household loan demand increases while banks' lending attitudes are expected to tighten, low-credit borrowers are likely to face difficulties in securing funds during actual loan execution.

▲ Non-Bank Sector Also Maintaining Conservative Lending Posture

Non-bank financial institutions are expected to strengthen their lending attitudes across all sectors except credit card companies.

The loan attitude index for the third quarter came in at -14 for mutual savings banks, -35 for credit unions, and -7 for life insurance companies.

Credit card companies recorded 0, expected to maintain the previous quarter's level.

Credit unions' lowest loan attitude index is analyzed as a result of multiple factors including weak local real estate conditions, household debt management, and concerns about rising delinquency rates.

As of March 2026, delinquency rates were 6.65% for mutual savings banks, 5.51% for credit unions, 1.99% for credit card companies, and 0.43% for life insurance companies.

With savings banks and credit unions maintaining relatively high delinquency rates, new loan screening and collateral valuation are likely to become more conservative.

▲ Non-Bank Sector Credit Risks Increasing Across All Industries

Credit risks at non-bank financial institutions are expected to increase across all sectors.

The credit risk index came in at 26 for mutual savings banks, 33 for credit unions, 7 for credit card companies, and 16 for life insurance companies.

Poor business conditions in some vulnerable sectors and diminished repayment capacity among low-income and low-credit borrowers were identified as key risk factors.

Credit unions' highest credit risk index is analyzed as reflecting concerns about defaults in local real estate and self-employed loans. Savings banks also have high proportions of real estate-related loans and mid-to-low credit borrower loans, and it was assessed that if economic slowdown continues, soundness burdens could expand.

▲ Loan Demand Showing Differentiation by Sector

Non-bank loan demand is expected to show divergent trends by sector.

Mutual savings banks recorded a loan demand index of 7 and life insurance companies 2, with demand expected to increase centered on corporate operating funds and household living expenses.

In contrast, credit unions came in at minus 12 and credit card companies at minus 7, with loan demand expected to decline.

Weak local real estate conditions and strengthened loan regulations constrained credit union demand, while card loans were also affected by household loan management and increased borrower repayment burdens.

These survey results show that financial institutions are likely to put more weight on soundness management rather than loan expansion in the third quarter.

Household loan supply is expected to be limited due to stricter regulations and repayment capacity screening, but corporate loan and living expense loan demand is projected to increase.

As fund demand grows, there are suggestions that if financial institutions simultaneously raise lending standards, SMEs and vulnerable households may be pushed out of regulated financial markets.

Key variables in the financial market going forward are analyzed to be Middle East tensions, market interest rates, and the pace of domestic demand recovery. If external uncertainties persist and interest rate burdens continue, corporate and household credit risks are likely to materialize into actual delinquencies and defaults.

This survey was conducted from the 4th to the 17th of last month targeting heads of credit management at 203 financial institutions through online surveys, mail, and interviews.