South Korea’s top two banks, Kookmin Bank and Shinhan Bank, reported record levels of loan write-offs in the final quarter of 2025, signaling increasing financial strain as the nation’s debt restructuring program entered its initial phase in October. Shinhan Bank’s write-offs and loan disposals increased by 358 billion won ($248 million), a 47.6% rise, reaching a total of 1.11 trillion won, according to financial reports.
The surge in bad loan write-offs comes amid a broader trend of rising delinquencies across the South Korean banking sector. According to a report from 알파경제, total write-offs by the country’s leading banks surpassed 8 trillion won for the first time. Korea’s banks collectively wrote off $5.8 billion in bad loans, reflecting a deterioration in asset quality.
The government-backed debt restructuring program, launched in October, aims to address mounting household and corporate debt. The program’s initial phase focuses on providing relief to borrowers struggling with repayments, but the increased write-offs suggest that a significant portion of loans are proving unrecoverable. The Export-Import Bank of Korea, in collaboration with commercial banks, recently launched the “Global Expansion K-Finance Council,” an initiative intended to bolster financial support for Korean companies expanding internationally, potentially mitigating some domestic lending risks.
The rising volume of non-performing loans is placing pressure on bank profitability and capital adequacy. While the exact impact on individual banks’ financial performance remains to be seen, analysts anticipate that further write-offs will be necessary in the coming quarters. The situation is being closely monitored by financial regulators, who are assessing the potential systemic risks posed by the increasing level of bad debt.
South Korea recently reignited its central bank digital currency (CBDC) program, with buy-in from major retailer Daiso, according to PaymentsJournal. This development occurs concurrently with the banking sector’s challenges, though a direct link between the two remains unestablished. The government has not yet issued a statement regarding the impact of the rising bad loan levels on the broader economic outlook.
