Key facts
- South Korean banks' bad-loan ratio increased in the second quarter of 2026.
- Substandard or below loans held by local lenders amounted to 18.9 trillion won ($13.8 billion) by the end of June.
- This represents an increase of 1.2 trillion won from the previous quarter.
- The ratio of substandard loans to total outstanding loans was 0.63% at the end of June, up 0.03 percentage points from the first quarter.
- Newly classified soured loans in the second quarter totaled 7.2 trillion won, an increase of 1.7 trillion won from the prior quarter.
- Local banks wrote off 6.1 trillion won worth of bad loans in the April-June period, also up 1.7 trillion won from the previous quarter.
South Korean banks experienced an increase in their bad-loan ratio during the second quarter of 2026, according to data released by the Financial Supervisory Service. The total value of loans classified as substandard or below (SBL) rose by 1.2 trillion won to 18.9 trillion won ($13.8 billion) by the end of June.
This brought the proportion of SBLs to total outstanding loans to 0.63%, a 0.03 percentage point increase from the first quarter. The rise in soured debts was driven by a significant increase in newly classified bad loans, which grew by 1.7 trillion won to 7.2 trillion won in the second quarter. Additionally, local banks wrote off 6.1 trillion won in bad loans during the same period, also an increase of 1.7 trillion won from the previous quarter.
The ratio for business loans classified as SBLs stood at 0.77% as of end-June, up 0.03 percentage points from three months prior. For household loans, the ratio was 0.33%, an increase of 0.01 percentage points from the first quarter.