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Japan’s lenders could call loans

But the main danger is with non-banks, with 23% of the market

July 30,2019
Japanese non-bank financials have loaned more than 17 trillion won ($14.4 billion) in Korea, according to Financial Supervisory Service (FSS) data.

This financing from Japan is 22.7 percent of all non-bank lending.

The figures were in a report released by Liberty Korea Party Rep. Kim Jong-seok and Democratic Party Rep. Kim Jong-hoon on Monday, and were based on data provided by the FSS.

While Japan is reportedly gearing up to expand its trade retaliation against Korea because of last year’s Korean Supreme Court’s ruling on wartime forced laborers, there are also concerns that Japan could start recalling loans.

The report estimates as of last year borrowing from Japanese savings banks and private loan companies totaled 17.4 trillion won. Loans from savings banks alone totaled 10.7 trillion won, which is 18.1 percent of the 59.2 trillion won borrowed from savings banks in Korea.

That figure hit 11 trillion won as of March, 18.5 percent of the overall 59.6 trillion won.

Loans from Japanese private lenders amounted to 6.7 trillion won, which accounts for 38.5 percent of the overall borrowing from such institutions in Korea.

Sanwa Money, a Japanese private loan company and No. 1 in Korea, has a loan balance of 2.1 trillion won, roughly 12.4 percent of the overall loans borrowed from private lenders in Korea.

Credit from Japanese non-bank financials is far more important in Korea than loans from Japanese commercial banks.

As of May this year, loans from Japanese banks totaled 24.7 trillion won. That’s only 1.2 percent of the 1,983 trillion won loan balance at Korean banks as of the first quarter.

The report raised concerns about the dominance of Japanese financial companies in Korea’s loan market.

Among the 79 savings banks in Korea, there are only four where Japanese shareholders dominate - SBI, JT, JT Chinae and OSB.

Three of these companies are on the list of top 10 savings banks. SBI is currently the largest, with 6.46 trillion won in loans, JT Chinae ranks eighth, with 1.87 trillion won, and OSB ranks ninth, with 1.79 trillion won.

In the case of private lenders, including No. 1 Sanwa Money, there are only 19 Japanese private lenders, 0.2 percent of a category with 8,310 institutions.

Withdrawal of Japanese capital could hit low-income households and small businesses particularly hard. These customers have difficulty borrowing from banks due to their low credit ratings and their lack of mortgages.

The credit being provided by Japanese non-bank financials is usually quite expensive.

Japanese private lenders charge an average of 23.3 percent, higher than the overall average of 19.6 percent in the Korean private lending market.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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