South Korea’s five largest banks have exhausted 85% of their full-year household lending quotas, leaving leveraged stock market funds facing a supply crunch.

South Korean media reported on July 12 that South Korea’s five major commercial banks have used more than 85% of their full-year household loan growth quota in the first half of this year, with two banks even exceeding their full-year caps. Against the backdrop of strict aggregate control targets set by regulatory authorities, the banks have almost no room for new lending in the second half, leading the market to predict a credit "cliff" will materialize in H2, and stock market leverage funds entering the market via loans will face significant contraction pressure. The report notes that the two major drivers of rapid loan growth are the continuously surging demand for mortgage loans and personal loans used directly for stock market participation. Although banks tightened lending pace at the start of the year, neither type of demand has seen a noticeable decline, ultimately driving a continuous rise in loan balances in H1. For investors relying on credit leverage to trade in the stock market, available external financing channels in H2 are facing substantial tightening.