Bank loan limits in South Korea are 85% exhausted, stock market leveraged funds face supply cut-off, borrowing money to trade stocks may "hit the brakes"!

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The credit space in South Korea’s banking system is rapidly shrinking, and the surge of leveraged capital entering the market is facing compulsory cooling.

South Korea’s five major commercial banks have already exhausted more than 85% of their annual household loan growth quota in the first half of this year, with two banks even surpassing their annual limit. Against the backdrop of strict total volume control targets set by regulators, banks have almost no space for new loans in the second half of the year, leading the market to predict the reality of a credit "cliff" in the second half. Stock market leveraged funds borrowed through loans may face significant contraction pressure.

The two main engines driving rapid growth in lending are the continued high demand for home mortgage loans and credit loans used to directly enter the market. Even though banks tightened their lending pace at the beginning of the year, neither type of demand saw a significant drop, ultimately causing loan balances to continually climb in the first half.

For investors relying on credit for leveraged participation in the stock market, the available external financing channels in the second half of the year are facing substantial narrowing.

Quota Crisis: 85% Used in First Half

According to data disclosed by Korea’s financial industry on July 12, as of the end of June, the combined household loan balance (excluding policy loans) of KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank—the five major commercial banks—stands at 647.58 trillion won, up 3.70 trillion won from the end of last year.

At the beginning of the year, South Korean financial regulators assigned total volume control targets for household loans to each financial institution, capping annual growth at 1.5%, lower than last year's actual rise of 1.7%, aiming to curb excessive household debt expansion. Based on this, the maximum total new household loans among the five banks for the year is about 4.34 trillion won, allocated as follows: KB Kookmin Bank 909.2 billion won, Shinhan Bank 850 billion won, Hana Bank 880.5 billion won, Woori Bank 826.6 billion won, NH Nonghyup Bank 870 billion won.

However, the actual increase of 3.70 trillion won in just the first half already accounts for 85.3% of the annual limit. The remaining quota for the year is about 639.5 billion won, distributed across the next six months, leaving extremely limited space.

Two Banks Have Exceeded Quota, Must Reduce Balance in Second Half

More urgently, two out of the five major banks have already surpassed their annual quota before the end of the first half. This means that these two banks must not only stop granting new loans in the second half but also actively pursue repayment of existing loans to bring the balance back to compliance.

The market expects that as banks are forced to tighten new credit and prioritize loan recovery, a significant "loan cliff" effect will emerge in the second half. For investors who have already or plan to enter the market via credit loans, this means a substantial narrowing of financing channels.

Stock Market Leverage Funds Under Pressure

One of the key drivers of this round of rapid household loan growth is the inflow of some loan funds into the stock market. Home mortgage loan demand remains strong, and credit loans for stock market investments are expanding in parallel, jointly pushing loan balances higher in the first half.

As banks’ credit quotas approach exhaustion, the sustainability of this funding source faces a direct challenge. If banks generally tighten lending in the second half, marginal liquidity contraction pressure will gradually transmit to the stock market, significantly limiting the incremental space for leveraged funds.

Risk Warning and Disclaimer ClauseThe market involves risk, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investments based on this are at one’s own risk. ```