Hidden risks? Korea steps up review of $37B overseas credit bets
Synopsis
South Korea expanded oversight of overseas private credit investments totaling 55.9 trillion won ($37 billion) as regulators worldwide increase scrutiny of refinancing and liquidity risks in private debt markets. Most exposure is tied to North American and European investments held by insurers, pension funds, and securities firms.
South Korea widened reviews of $37 billion in overseas private credit investments amid rising global concerns over debt market risks.
Key Highlights
- South Korea reviewed 55.9 trillion won in overseas private credit exposure across financial institutions.
- Most investments were linked to North American and European private debt markets.
- Global private credit assets have expanded beyond $2 trillion, according to IMF and Preqin data.
- Regulators cited refinancing pressure and liquidity risks amid higher global borrowing costs.
South Korea has extended its assessment of foreign private credit investments valued at around 55.9 trillion won ($37 billion) amid growing international concerns about risks piling up in the country's rapidly growing private debt market.
Insurers, pension funds, banks, securities companies and mutual finance companies are included in the review, the Financial Supervisory Service said. The vast majority of exposure is related to private credit markets in North America and Europe, where institutional investors have dramatically expanded their non-bank lending.
It follows an increasing scrutiny of refinancing pressure in private markets by regulators and central banks around the world, in the wake of tighter lending rates and lower deal activity.
Debt markets are tightening all over the world
The International Monetary Fund (IMF) and research firm Preqin estimates the global private credit market at more than $2 trillion by 2025.
Over the last decade, over the last decade, companies have looked for better yields than those on government bonds and public credit markets, which led to the large pension funds and insurers around the world allocating more to private debt.
The IMF and Bank for International Settlements (BIS) reports recently indicated that rising interest rates could exacerbate pressures on highly leveraged companies and institutions that have over-indebted themselves, for which the private sector provides funding. There have also been some concerns about defaults on commercial real estate and mid-market corporate loans.
Insurers and Pension Funds have a large exposure
Insurers represent about 28.5 trillion won of total overseas private credit exposure, more than any other domestic institution, the South Korean regulators said.
Combined, pension-related institutions (such as the National Pension Service (NPS) and Korea Investment Corporation (KIC)) have approximately 18 trillion won in total. The overall exposure of the financial sector is still small, about 0.4% of the financial sector's total assets in the country, according to authorities.
Open-ended funds accounted for less than 10% of the total holdings, which minimised immediate risks for investors associated with the sudden withdrawal of their funds, the FSS added.
Better Regulation of Financial Firms
The regulator is investigating liquidity positions, concentration risk and retail investor's exposure relating to foreign alternative investment products.
Under the current market situation, it is essential to continually monitor the investment of overseas private credit, which generally has less transparency and less liquidity than public assets, said FSS Governor Lee Chan-jin.
FAQs
Q1. Why are private credit markets facing increased scrutiny globally?
Regulators are concerned about refinancing pressure, liquidity risks, and rising defaults as higher interest rates strain corporate borrowers.
Q2. How much overseas private credit exposure does South Korea hold?
South Korean financial institutions held about 55.9 trillion won ($37 billion) in overseas private credit investments as of February 2026.
Q3. Which sectors are most exposed to overseas private credit investments in Korea?
Insurers hold the largest exposure, followed by pension funds, securities firms, banks, and mutual finance institutions.
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Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
