South Korea

Intelligence for Better Decision Making

Rising Household Debt Alters Borrowing Patterns and Slows Private Consumption in South Korea

Dec. 1, 2025 | Households

South Korea’s rapid household debt growth is reshaping lending patterns, elevating borrowing costs and dampening private consumption.

**Year-end volume limits at the country’s five major commercial banks have effectively capped mortgage lending.**
In November, outstanding household loans rose by 1.53 trillion won—slower than October and barely above September’s gain. Mortgage balances, at roughly 611 trillion won, recorded their smallest monthly increase in one year and eight months, prompting some banks to suspend new mortgage application counters.

**By contrast, unsecured household lending surged by 1.14 trillion won in November, marking the largest monthly increase in over four years.**
Personal overdraft balances alone expanded by 917.1 billion won—more than four times the growth of other unsecured loans—as borrowers tap credit lines to offset restricted mortgage access and to fund equity and other asset investments.

**Household lending rates have climbed alongside rising bank bond yields.**
Major banks now offer mixed-rate mortgages with upper bounds above 6%, a level unseen in nearly two years, while lower bounds have returned to the mid-4% range after about a year. Credit loan rates for prime borrowers have also risen in line with one-year bond yields, pushing up overall borrowing costs.

**A Bank of Korea report released on November 30, 2024, shows the household debt-to-GDP ratio jumped 13.8 percentage points from 2014 to 2024, the third-largest increase among 77 IMF-surveyed countries after China and Hong Kong.**
BIS data indicate the debt service ratio climbed 1.6 percentage points from Q1 2014 to Q1 2025—the second-highest global rise after Norway—reflecting substantially higher principal and interest burdens on households.

**Despite this debt surge, private consumption’s share of GDP fell by 1.3 percentage points over the past decade, a divergence from peer countries with similar debt trajectories.**
The BOK estimates that excessive household credit growth since 2013 has reduced annual private consumption growth by about 0.40 to 0.44 percentage points. If household debt had remained at 2012 levels, private consumption in 2024 would be 4.9–5.4% higher, boosting its GDP share from 48.5% to roughly 50.9%.

**South Korean consumers exhibit a notably weak wealth effect from real estate: a 1% rise in property prices spurs only a 0.02% increase in consumption, compared with 0.03–0.23% in other advanced economies.**
Contributing factors include the absence of housing liquidity products such as reverse mortgages, cultural norms treating home equity as reserved for future housing needs, and rising vacancy rates in non-residential real estate.

**The BOK describes household debt’s impact on consumption as a gradual, chronic contraction—akin to arteriosclerosis—rather than a sudden crisis, although it notes some recent declines in the debt-to-GDP ratio.**
Demographic shifts have also weighed on consumption growth, subtracting 0.8 percentage points over the decade, while debt accumulation shaved off about 0.4 percentage points annually. The report warns that heavy debt service obligations will likely continue to constrain private consumption over the long term.

South Korean Corporate Dollar Holdings Reach Record High Amid Won Depreciation

Dec. 1, 2025 | Financial System

Corporate deposits in US dollars at South Korea’s leading banks have climbed to unprecedented levels as the won weakens and exchange-rate uncertainty rises.

**Five major South Korean banks—Kookmin, Shinhan, Hana, Woori, and NongHyup—saw corporate dollar balances jump by roughly 21 percent in November, rising from $44.325 billion at the end of October to $53.744 billion by November 27, 2025.**
This increase marks the fastest monthly growth in corporate dollar holdings so far this year.

**Banks registered this surge against a backdrop of a sharply weakening won and forecasts that the won-dollar rate could top 1,500 won.**
In past episodes of dollar strength, investors often sold dollars to lock in exchange gains. This time, however, corporations have continued to build their dollar reserves, driven by expanding US investments and mounting exchange-rate uncertainty that leads firms to hold onto dollars in case the greenback’s strength endures.

**Retail investors have mirrored this trend, boosting their dollar deposit holdings for the fourth straight month.**
As of November 27, individual deposits reached $12.253 billion, with one bank reporting more than $3 billion in retail dollar balances—the highest since January 2022. Growing interest in overseas equities and expectations of further dollar gains have sustained this demand for foreign currency deposits among individuals.

Including public institutions, total dollar deposits at the five banks reached $67.01 billion by the end of November, an 18 percent increase from October and the largest monthly rise across all customer segments this year.

**The won’s value fell from about 1,390 won per dollar in early September to over 1,470 won by late November, despite government efforts to support the currency.**
Market observers point to ongoing volatility and no clear signs that the foreign exchange market will stabilize soon.

**To address the won’s rapid decline, the South Korean government and the National Pension Service met on November 24 to discuss measures for exchange-rate stabilization.**
While they did not announce any specific actions, the meeting reflects authorities’ deep concern over persistent currency fluctuations.

Monitored Intelligence for South Korea - Dec. 1, 2025

News
Media
152

Government
Releases
1

City/State
Releases
0

Embassy
Releases
0

Foreign
Service
Advisories
0

Academic/
Think
Tank
1

Podcasts
0

Videos
0

Social
Media
0

Business
Releases
0

Erudite Risk takes an all risks approach to intelligence reporting. We categorize key intelligence into one of 40 different risk intelligence categories.

The goal is to provide intelligence that allows decision makers to avoid being blindsided by what they may have missed, while informing them to make better decisions as well.

Risk Categories Reported on Today

Risk Category

Items Reported On

Protest, Demonstration, Dissent

Cyber Attacks and Data Loss

Regulation

North Korea

Accidents

Crime

Privacy

Product Recalls

Regulatory Enforcement Actions

Political Scandal or Corruption

Natural Disasters

Erudite Risk also includes operations categories so you can monitor the environment for better decision making. Everything is tied together--what happens in risk affects operations and what happens in the market impacts risk profiles.

We categorize key intelligence into one of 30 different operations intelligence categories.

Different roles and functions within the organization can monitor different key issue areas. HR may monitor employment, wages, regulations, labor and management relations, etc., while P&L leaders may monitor overall developing trends.

Operations Categories Reported on Today

Operations Category

Items Reported On

Tech Development/Adoption

Real Estate

Political Policy Resistance

Economic Growth

Financial System Problems

Politics and Elections

Wages and Compensation

Demographics

Asset Price Change

Investor Sentiment

Bizdev-Partnering

Operating Results

North's Kim vows to bestow new strategic assets, duty on air force in anniversary celebrations

Joongang Ilbo | English | News | Dec. 1, 2025 | North Korea

North Korean leader Kim Jong-un attended a ceremony commemorating the 80th anniversary of the Korean People's Army Air Force on November 28, 2025, at Kalma Airport, where he pledged to bestow new strategic military assets and assign a "new important duty" to the air force. However, he did not reveal specific details about the new assets.

Kim emphasized the air force's crucial role in North Korea's nuclear deterrent strategy and its responsibility to counter espionage and military provocations threatening the nation's sovereign airspace. This announcement aligns with North Korea's ongoing efforts to modernize its conventional military and enhance its aerial combat capabilities, following recent developments such as live-fire air-to-air drills and the introduction of an airborne early warning and control aircraft system earlier in 2025.

The event also featured Kim's daughter, Ju-ae, marking her first public appearance since accompanying him to China in September. During the celebrations, Kim observed an air force demonstration flight, attended an art performance, and awarded the Order of Kim Jong Il, the highest national honor, to the air force.

"뭐, 2조원?"… 예상보다 큰 '홍콩 ELS ' 과징금에 은행권 당황, 실적 악화 우려

What, 2 trillion won?… Banks Flustered by Larger-than-Expected Hong Kong ELS Fine, Concerned About Worsening Performance

Digital Daily | Local Language | News | Dec. 1, 2025 | Regulatory Enforcement Actions

Financial authorities have informed five major South Korean banks—KB Kookmin Bank, Shinhan Bank, NH Nonghyup Bank, Hana Bank, and SC First Bank—of fines and administrative penalties totaling approximately 2 trillion won related to the incomplete sale of Hong Kong H-index equity-linked securities (ELS). The fines stem from findings that the banks misled customers about principal guarantees and failed to properly disclose risks, violating the Financial Consumer Protection Act. Woori Bank was exempt due to minimal sales volume.

The Financial Supervisory Service (FSS) decided to calculate fines based on the total sales amount rather than fees, leading to much larger penalties than the banks had anticipated. KB Kookmin Bank, with the highest sales volume of over 8 trillion won, is expected to bear the largest portion of the fines. The disciplinary process will begin in mid-December, involving the Disciplinary Review Committee, Securities and Futures Commission, and Financial Services Commission.

The fines' magnitude has caused concern among the banks, as it far exceeds earlier expectations after regulatory amendments last October had lowered potential fines and expanded reduction rates for consumer protection efforts. The large penalties are likely to negatively impact the banks' earnings, treating the fines as non-operating losses, and may also affect their capital adequacy. Banks are expected to attempt to negotiate reductions during the disciplinary review process.

AI 패권 경쟁 속 완화 목소리↑…특혜·경제력집중 우려도[금산분리 갈림길①]

Calls for Relaxation Rise Amid AI Hegemony Competition… Concerns Over Privileges and Economic Concentration Grow [Crossroads of Geumsan Separation ①]

Newsis | Local Language | News | Dec. 1, 2025 | UndeterminedPolitical Policy Resistance

Amid escalating global competition in artificial intelligence (AI) and semiconductor industries, South Korea is considering easing its long-standing separation-of-industry-and-finance regulations to stimulate large-scale domestic investment. The business community argues that these regulations, originally designed in the 1980s to prevent conglomerates from using financial resources as private treasuries and to limit systemic risks, now constrain corporate investment activities in innovative sectors due to the need for significant long-term funding. Prominent figures, including President Lee Jae-myung and industry leaders like Seo Jung-jin of Celltrion and Jin Ok-dong of Shinhan Financial Group, support partial deregulation to facilitate corporate venture capital (CVC) investments and joint ventures between industrial and financial capital.

However, there are significant concerns about the potential side effects of such regulatory relaxations, including increased concentration of economic power, preferential treatment of large conglomerates, and risk of financial sector instability. Critics caution that loosening restrictions without clear safeguards could transform investment funds into private coffers for conglomerates and blur boundaries between industrial and financial capital. The Fair Trade Commission, led by Chair Joo Byung-gi, remains particularly cautious, emphasizing the importance of maintaining current regulatory principles and urging comprehensive social consensus before making changes.

In response, government discussions are focused on maintaining the existing regulatory framework with provisions for limited, temporary exceptions in strategic sectors like AI. Legislative efforts, including a recent Fair Trade Act revision proposal, suggest allowing the creation of "Advanced Strategic Industry Funds" with temporary exemptions to ownership rules within holding company structures. Additionally, there are proposals to loosen caps on outside fundraising and overseas investment limits for CVCs. Experts advocate for regulatory adjustments accompanied by strong safeguards to prevent misuse of funds and to balance investment activation with the prevention of moral hazard and undue concentration of economic power.

Try the Daily Briefing

Try the Daily Briefing for your country of choice for two weeks--free of charge and with no obligation.

Have a service or subscription question? We'd be happy to hear from you.

How can we help?

Full Name:

Email Address:

Type of Inquiry:

Country of Interest:

Contact us for a free trial of the Daily Briefing for your country of choice.

We currently cover:

South Korea
Japan
China
Taiwan
Vietnam
India

info@eruditerisk.com

The Daily Briefing is delivered Monday through Thursday via email.

Each day's reports include a combination of:

Takes
Takes are our deep dives into a topic of enduring interest or concern. Takes include copious references to all the media resources we gathered to build them.

Developments
Developments are key issues and incidents being heavily reported on in country. These are the centers of local thought gravity around which everything else revolves.

Risk Media
Summaries and analysis of the most important risk issues reported on in media, arranged by risk category. Learn about risk trends and issues while they are developing--before they blow up.

Ops Media
Summaries and analysis of the most important operational issues reported on in media, arranged by operations category. See what's changing in your market, and what's not.

Government Releases
Government press and data releases on key economic data, regulation, law, intiatives, incidents. Straight from the government's press to your eyes in less than a day.

Embassy and Business Association Releases
Statements and news releases from foreign embassies and business/industry associations, including chambers of commerce.

The Daily Briefing is comprehensive!

The Daily Briefing can run 50-100 pages each day!

Luckily, Erudite Risk tailors every report specifically to you.

Content Filtering
We try hard to ensure that every piece of information included in each day's reports will be of interest to our readers.

To fulfill our goal of comprehensively monitoring the intelligence landscape and also keeping reports readable, we build big reports--then deliver only the information that applies to you.

Each Daily Briefing is a bespoke report matched to your concerns. Tell us what you want in it, or we can match it to your professional needs. It's that easy.