When Ko Young-il, the slender-built president of WB Bank, opened the wooden door and entered the office, Seok-won, who had been seated behind the desk, set the documents in his hand aside and greeted him.
"Welcome."
Rising to his feet, Seok-won raised an arm and gestured toward the sofa off to one side.
"Have a seat over there."
"Yes."
After Seok-won walked around the desk and took the central seat first, Ko Young-il, who had been waiting respectfully, followed and sat down on the sofa to the right.
Seok-won crossed one leg over the other, rested an arm along the back of the sofa, and looked at Ko Young-il as he spoke.
"I've got some excellent coffee beans that just came in. Care to try a cup?"
"If you're saying that, Chairman, they must be something special," Ko Young-il replied.
"They're called Yauco Selecto. Coffee beans from Puerto Rico. If you list the finest beans in the world, this one always makes the cut."
"Then I really ought to try it."
As Ko Young-il replied with a smile, Seok-won turned slightly and pressed the intercom button installed on the side table.
[Yes, Chairman.]
"Bring two cups of Yauco Selecto. Hot."
[Understood.]
Straightening his posture, Seok-won leaned back against the sofa and began.
"How is the handling of Baekje Industrial Development's bonds coming along? The company defaulted back in March."
Baekje Industrial Development was one of the affiliates of the Hyundai Group, which had gone through severe turmoil the previous year due to an internal power struggle. It was a construction firm focused on housing development, operating under the apartment brand Hyundai Apartments.
"Fortunately, the size of the loan extended to Baekje Industrial Development wasn't very large, and we secured ample collateral, so there won't be any issues recovering it."
"The loan tied up with Baekje Industrial Development was around forty billion won, wasn't it?"
"To be precise, forty-five point two billion won. Part of it will be recovered in kind. We've agreed to receive seventeen luxury apartments, each around fifty pyeong in size, that Baekje Industrial Development built in Seocho-dong."
"Did you say apartments in Seocho-dong?"
"Yes."
Seeing Seok-won show interest, Ko Young-il added further details.
"They're located directly across from the Seoul City Education and Training Institute."
"Then that's near Yangjae Station."
"That's right."
Hearing that the collateral consisted of real estate in a prime area of Seoul, right next to Dogok-dong, Seok-won responded positively.
"With that location, we should be able to recover the full principal without any trouble."
At that moment, Na Seongmi entered with the coffee, and the conversation naturally paused.
She placed the cups, fragrant with coffee aroma, along with a light assortment of snacks in front of the two men, then quietly left the room.
Ko Young-il lifted his cup and took a sip. His eyes widened slightly as he let out an impressed exclamation.
"Just as you said, Chairman, it's excellent. Smooth and sweet, with an aroma that fills your mouth… I've never had coffee this good before."
"If it suits your taste, I'll give you some beans to take home and enjoy."
"Haha. Then I'll gladly accept."
Holding his own coffee cup in one hand, Seok-won asked Ko Young-il,
"What are you planning to do with the apartments you received from Baekje Industrial Development?"
"We plan to proceed with an immediate sale and recover the loan principal as quickly as possible."
Seok-won thought it over for a moment, then spoke again.
"At what price are you planning to sell them?"
"Taking market prices into account, we believe around ten billion won for all seventeen units would be appropriate."
"So roughly six hundred million won per unit."
"That's correct."
Considering that real estate prices were set to skyrocket starting next year, a large apartment near a major station in Gangnam priced at around six hundred million won was practically a bargain.
"Instead of that, how about selling them to Bluehole Venture Investment?"
"Pardon?"
Caught off guard by the suggestion, Ko Young-il looked at him in surprise.
"Wouldn't that be much simpler and less troublesome than going through a separate sales process?"
"That's true, but it's not just one or two units. There are seventeen of them. How would Bluehole Venture Investment even make use of all that?"
"Well, there are plenty of uses. We could use them as company housing for employees for now, and later sell them to realize capital gains."
"I suppose that makes sense. It's the kind of property where prices are far more likely to rise than fall, so holding onto it wouldn't be a bad option."
Nodding in agreement, Ko Young-il added,
"As long as we can recover the loan principal, that arrangement works for us."
"Then I'll inform Director Eom. Let's proceed with Bluehole Venture Investment taking over the Seocho-dong apartments."
"Understood."
Wearing a satisfied smile, Seok-won took another sip of his coffee and smoothly shifted the conversation to the main point.
"I've been hearing that credit card companies are aggressively competing for new members by offering excessive giveaways these days. WB Bank isn't doing anything like that, is it?"
Meeting his gaze, Ko Young-il answered without hesitation.
"Of course not. As per your instructions, even when recruiting new members, we strictly screen eligibility before issuing cards."
Originally, WB Bank did not have a dedicated credit card company among its affiliates.
However, after Seok-won acquired Diners Club Korea along with a securities firm from the bankrupt Daegwang Group, the bank had entered the credit card business in earnest.
Ko Young-il glanced at Seok-won cautiously and continued in a careful tone.
"Because of that, other card companies are rapidly increasing their number of new members and sales. Meanwhile, our growth has been relatively modest, so our market share keeps slipping. The card division has been voicing quite a few complaints about it."
Unlike other card companies locked in a brutal war of attrition, they were not only restraining excessive recruitment efforts, but even among the new applicants they did attract, three or four out of ten were being rejected due to strict screening criteria. It was only natural that frustration was building.
So much so that rumors had begun circulating among Diners Club Korea employees that their owner, Seok-won, had no intention of growing the card business at all.
Of course, that wasn't true. But from the perspective of employees who had no idea about the violent storm looming just ahead, such misunderstandings were inevitable.
Seok-won took a casual sip of his coffee and replied evenly.
"Isn't it only natural to issue credit cards exclusively to people who pass proper evaluations of credit score, income level, and delinquency history?"
"Of course, that's true, but…"
"On the contrary, issuing credit cards indiscriminately even to minors with low credit and no income, without obtaining consent from their legal guardians, is what's truly strange and wrong."
He wasn't incorrect, but Ko Young-il chose his words carefully as he pushed back.
"Still, it's also true that overly strict restrictions are suppressing new member acquisition."
He glanced at Seok-won repeatedly, then broached the subject cautiously.
"Taking into account that our market share is declining, wouldn't it make sense to apply the screening criteria a bit more flexibly?"
He had phrased it diplomatically, but in essence, he was suggesting that they should pursue aggressive customer acquisition like other card companies.
Seok-won looked straight at Ko Young-il and spoke in a notably serious tone.
"You've probably seen the recent media reports saying that Korea has overtaken Japan to become the largest credit card market in the Asia-Pacific region."
"Yes."
"Everyone seems to be celebrating, saying that the government's goal of establishing a credit-based society and revitalizing domestic consumption has been achieved rapidly. But I see it differently."
"…?"
"According to a study by the Eldorado Fund, last year's combined transaction volume for Visa and MasterCard reached 127.266 billion dollars, surpassing Japan's 114.341 billion dollars, even though Japan's economy is nearly ten times the size of Korea's."
Setting his coffee cup down, Seok-won straightened his posture and continued in a firm, heavy voice.
"On the surface, it may look like a positive outcome. But if you look more closely, you'll realize it's actually a warning sign."
"A warning sign, you say?" Ko Young-il asked, knitting his brows.
"Yes."
Seok-won nodded gravely.
"Sixty-five percent of the spending wasn't for purchasing goods or services with credit cards. It was cash advances."
"…!"
"You're aware that the delinquency rate on credit card loans, including cash advances and card loans, jumped sharply from 7.7 percent at the end of last year to 8.8 percent in the first half of this year."
By now, Ko Young-il was listening with a hardened expression.
"There's an old saying that when something is bought on credit, even a cow gets slaughtered. When you swipe a credit card, no cash immediately leaves your wallet. That makes overspending far easier and more tempting."
Seok-won's low, subdued voice weighed heavily on the room.
"Of course, if used with proper planning, credit cards can be a very useful tool. But considering that most of the people being aggressively recruited as new cardholders in this overheated competition have low credit, poor financial awareness, and are young adults easily swayed by temptation, isn't it far more likely they'll act oppositely?"
Ko Young-il could offer no rebuttal to Seok-won's words.
"At first, they think lightly that they can just pay in installments. But as their monthly charges grow beyond what they can handle, they'll start relying on cash advances or card loans."
"..."
"And when even that becomes difficult, they'll take out new credit cards just to cover existing bills and pull more cash advances. Before they know it, they're juggling three or four cards, trapped in what people call debt juggling."
"You're saying the rise in cash advance usage and delinquency rates is evidence that things have already reached that dangerous stage."
"If not, why would anyone turn to cash advances and card loans with annual interest rates of fourteen to eighteen percent, when regular bank loans cost only nine to ten percent a year?"
Seeing the gravity settle across Ko Young-il's face, Seok-won continued.
"On the other hand, it also means that a large number of people with credit ratings so low they can't even borrow money at a bank counter are relying heavily on credit cards."
"Hm."
"When people start juggling debt like that, the high interest rates ensure that the principal doesn't go down. Instead, the amount they owe keeps growing over time. Eventually, that leads to delinquencies, and card companies will increasingly fail to collect what they're owed."
Imagining such a grim scenario, Ko Young-il swallowed dryly without realizing it.
"Even if just thirty percent of the more than seventeen trillion won in credit card loans issued in the first half of this year alone were to turn into bad debt, it would be a shock severe enough for card companies to struggle to withstand."
Ko Young-il leaned forward and pushed back.
"As you say, the rise in delinquency rates is concerning, but isn't the likelihood of things spiraling into the worst-case scenario you're describing still relatively low?"
At the suggestion that he might be focusing too much on the negative, Seok-won's expression hardened.
"Risk always strikes when you least expect it. The moment the delinquency rate of 8.8 percent crosses a critical threshold, bad debt at card companies will explode and become the trigger that shakes the Korean economy."
Seok-won stated this with absolute conviction.
At first, it sounded hard to believe. But when it was Seok-won of all people speaking as if a credit card debt bomb were a foregone conclusion, the possibility suddenly felt real, and a wave of unease washed over him.
"Th-then what should we do?"
"We tighten risk management even more than we are now and prepare for the shock that's coming."
Seok-won's eyes shone with resolve, as if to say that this was precisely Ko Young-il's responsibility.
"If we do that, when bad debt erupts, and other card companies are left reeling, we'll be handed a golden opportunity to dominate the market instead."
TL/n -
Yauco Selecto is a premium Puerto Rican coffee, often regarded as one of the island's finest specialty beans, known for its smooth, rich flavor and limited availability.
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The Korea credit card crisis refers to the 2003 financial turmoil caused by a massive boom-and-bust in consumer credit card lending, which nearly collapsed the country's financial system.
After the 1997 Asian Financial Crisis, South Korea encouraged household consumption to stimulate recovery.
Banks and card companies aggressively promoted credit cards, offering easy approvals and even cash loans.
By 2002, over 100 million credit cards were issued in a country of just 48 million people
By 2003, over 3.5 million Koreans were delinquent on card debt