Credit Risk

Credit risk is the possibility that a borrower or counterparty will fail to meet its repayment obligations, causing losses for financial institutions or investors. Sources of risk have recently broadened to include a potential bubble in AI capital spending, private-credit defaults, growth in household and consumer lending, and changes to immigration and student-loan policies. South Korean banks are also facing tight lending capacity. These developments could affect bank underwriting standards, corporate funding costs and market liquidity, warranting continued monitoring of default rates, loan quality and regulatory measures.