Individual investors who borrowed money to invest in stocks remain trapped in heavy debt even after facing forced liquidation triggered by stock market plunges.
According to data submitted by the Financial Supervisory Service to the office of People Power Party lawmaker Park Dae-chul, the unrecovered principal following forced liquidation for retail investors at the top 10 domestic securities firms stood at approximately 37.8 billion won from January to July of this year.
During the same period last year, the unrecovered principal was about 7.5 billion won, marking a more than fivefold increase in a single year.
Unrecovered principal occurs when an investor borrows money from a securities firm to buy stocks, but due to a sharp stock price crash, forced liquidation fails to fully cover the loan principal even after selling off the holdings.
This happens when securities firms attempt to recover the principal through forced liquidation, but the debt is so massive that the total liabilities cannot be fully collected.
Unrecovered principal surged starting in June of this year.
The unrecovered principal, which stood at around 5.5 billion won in January, skyrocketed to 13.1 billion won after June as stock market volatility expanded.
Because the currently compiled unrecovered principal represents the balance of debt remaining immediately after forced liquidation, the amount could decrease if investors inject additional cash or pay off their debts to the securities firms.
The balance of accounts receivable, which can lead to forced liquidation, is also on the rise.
The accounts receivable balance across the 10 securities firms surpassed 1 trillion won for the first time in May of this year.
It was found to have surged to 1.351 trillion won as of the end of July.
Reported by Jung Da-eun | Video by Kim Min-ji | Graphics by Yook Do-hyun | Produced by SBS Digital News
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