South Korea launches 1375 debt hotline after KOSPI's 9% crash

South Korea's government is rolling out a national debt counseling hotline and expanding aid centers after a record wave of forced retail liquidations.

South Korea's financial regulator unveiled a suite of suicide prevention measures Monday, including a national debt counseling hotline, after the KOSPI's 9 percent crash on July 13 triggered forced liquidation of as many as 460,000 retail leveraged accounts.

"Economic crisis-driven suicide is social murder," Lee Eog-weon, chairman of the Financial Services Commission, said at a cabinet meeting where the measures were approved. "We will do everything in our power to save lives."

The centerpiece is a unified debt counseling hotline — 1375 — launching in October and operated by the Credit Counseling & Recovery Service, offering free one-call access to debt adjustment, personal bankruptcy support, and employment assistance. The government is also expanding its network of personal rehabilitation centers to 12 from 10 and comprehensive financial support centers to 56 from 50. Separately, BNK Busan Bank will offer discounted loans for vulnerable borrowers, while Woori Card plans a new credit card product for individuals who qualify for neither standard nor政策性 cards.

The measures come as the human toll of the KOSPI crash becomes clear. The single-day forced liquidation total reached 344.2 billion won — the largest this year — while total retail losses from leveraged trading over the past month hit 2.15 trillion won, according to brokerage and foreign institution estimates. Investors aged 20 to 30 accounted for 62 percent of liquidated accounts, suggesting lasting damage to retail participation in South Korea's equity market.

The FSC will also develop an "economic crisis family identification model" in partnership with the Ministry of Health and Welfare, combining financial data such as debt information with non-financial data including health insurance payment records to proactively flag at-risk households. The system will feed into the ministry's existing crisis family identification platform.

The insurance industry plans to offer free credit life insurance through mutual aid funds to comprehensive support service users, covering partial debt adjustment repayments in the event of critical illness or death. The FSC will also consolidate social contribution program information on its ITDA platform for vulnerable financial users.

Regulators Meet Thursday as Leverage Crisis Deepens

The FSC's announcement follows a brutal session on July 13 when the KOSPI plunged 9 percent, with SK Hynix falling more than 15 percent in its worst single-day drop on record. Goldman Sachs' sales and trading desk estimated that gamma rebalancing from single-stock two-times leveraged ETFs tracking Samsung Electronics and SK Hynix accounted for 62 percent of local institutional net selling that day.

South Korea's top financial regulators — the Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service, and the Bank of Korea — will hold an emergency "F4 meeting" on Thursday to discuss further measures. Potential steps under consideration include raising margin requirements for leveraged products, restricting daily price fluctuation limits, and tightening suitability assessments, according to local media reports.

The crash has drawn comparisons to past retail liquidation events in South Korea, including the 2020 margin call wave during the Covid-19 selloff. But the scale is unprecedented: the 344.2 billion won single-day forced liquidation total exceeds any single day during that period, according to FSS data.

"These leveraged ETFs have been particularly devastating for retail investors, many of whom viewed them as long-term investments rather than short-term trading tools," said Jung In Yun, chief executive officer at Fibonacci Asset Management. "The losses could reduce retail appetite for semiconductor stocks, making any recovery more dependent on foreign institutional flows."

President Lee Jae-myung last month directed the cabinet to "develop measures to further identify vulnerable borrowers trapped in debt and strengthen debt adjustment-related outreach," according to a presidential statement.

This article is for informational purposes only and does not constitute investment advice.