Financial Struggles Lead to Record High in Promissory Note Defaults

As corporate financial difficulties mount, the promissory note default rate has surged to a decade-high, signaling growing distress in the business sector.

The Bank of Korea reports a startling tenfold increase in the national promissory note default rate, from 0.04% in February to 0.4% in May, the highest since March 2015.

Understanding the Impact of Defaults

When businesses fail to meet their promissory note obligations, it not only leads to transaction suspensions but can also push companies towards bankruptcy, exacerbating the financial crisis.

Loan Delinquency Rates Reflect Broader Economic Challenges

The delinquency rates for both large and small enterprise loans have seen significant upticks, with large enterprises jumping from 0.02% to 0.11% and SMEs from 0.44% to 0.55% year-over-year.

A Surge in Bankruptcies

From January to May, corporate bankruptcy filings rose by 13.8%, with 922 cases reported, underscoring the severity of the current economic downturn.

The Bank of Korea warns of increasing risks to corporate solvency, pointing to the construction industry's slump and volatile international trade conditions as key factors.