As the domestic stock market has shown high volatility recently and stock trading has been active, demand for stock loans (linked credit), which are credit loans taken out using securities accounts as collateral to secure investment funds, has grown significantly. The Financial Supervisory Service (FSS) noted that excessive leveraged investing beyond one's repayment capacity could lead to large losses from forced liquidation (margin calls) if stock prices plunge.
On the 13th, the Financial Supervisory Service (FSS) said that while the domestic stock market was strong at the start of the year, market uncertainty has expanded this month due to the Middle East war, and it guided investors on precautions when using stock loans.
With growing demand for leveraged investing, the balance of margin loans rose from 27 trillion won at the end of last year to 32 trillion won on the 11th, raising concerns about individuals' "bitrade" (borrowing to invest).
In addition to margin loans, the balance of stock loans taken from capital companies and others to fund stock purchases reached 1.6 trillion won as of the end of January this year, according to estimates. Although smaller than margin loans, it has been increasing from about 1.2 trillion won at the end of last year.
Stock loans are high-risk products that lend up to three times the collateral. Caution is needed as market volatility is expanding significantly.
The Financial Supervisory Service (FSS) pointed out that, in situations where loans are handled non-face-to-face, users of stock loans may not sufficiently understand account management restrictions that must be observed and guidance on risks such as forced liquidation. It also warned that if stock prices plunge and forced liquidation occurs, investors may fail to respond in time and suffer losses.
An official at the Financial Supervisory Service (FSS) said, "To prevent forced liquidation due to a drop in the collateral ratio, you generally need to deposit additional collateral such as cash or repay part of the loan by the next business day," adding, "Keep this in mind when applying for a loan and decide carefully within a manageable range after considering your own cash position and other expenditures such as housing costs."
The Financial Supervisory Service (FSS) emphasized the need to manage risks in advance by frequently checking one's collateral ratio through securities firms' home trading systems (HTS) and other channels to control investment losses from forced liquidation and other risks. It also said borrowers should provide up-to-date contact information to lenders and securities firms so they can properly receive important loan-related information.
The Financial Supervisory Service (FSS) plans to closely monitor trends in stock loan offerings and, if necessary, issue consumer alerts to ensure there are no gaps in consumer protection. An official at the Financial Supervisory Service (FSS) said, "With internal and external uncertainties increasing, we need to heighten awareness of borrowing to invest and thoroughly manage risks to protect investment assets and ensure sound securities transactions."