[Economy 365]

Loans effectively written off as unrecoverable by the top five commercial banks have surpassed 1.2 trillion won, marking the highest level in seven years.

At the end of the second quarter of this year, the "estimated losses" of the top five banks stood at 1.2109 trillion won, representing a 26.6% increase compared to the same period last year.

Estimated losses refer to loans that are deemed difficult to recover due to a severe deterioration in the borrower's repayment capacity, making a write-down inevitable.

In particular, estimated losses on corporate loans accounted for about 80% of the total at 980.9 billion won, a 26.3% increase from a year earlier.

Estimated losses on household loans also rose 28.1% to 229.8 billion won.

"Substandard loans," which are just one step away from becoming distressed, increased by 5.7% from the previous year to 10.2177 trillion won.

The banking sector stated that soundness indicators are worsening due to rising interest rates, the sluggish domestic economy, and the downturn in the commercial real estate market, prompting them to tighten asset management.

*This article was produced using AI audio.