FSC “Excluding loans less than 6 months following implementation…2 Consider the soundness of the financial sector”
New Start Fund briefing session hosted by the Financial Services Commission
Officials from the second financial sector, such as savings banks, raised concerns regarding a decrease in the number of customers as there are many customers who use the second financial sector among the applicants for the ‘Startup Fund’, a debt reconciliation program for self-employed and small business owners.
Officials from the financial sector expressed their opinions on the 18th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul at a briefing session for the new start fund financial sector hosted by the Financial Services Commission.
Although the financial authorities are discussing measures to minimize damage to financial companies in consideration of the opinions of the second financial institutions, they warned that loans from the second financial institutions, which have surged since Corona 19, will become insolvent following the end of the maturity extension measures.
The Startup Fund is a fund that adjusts debts of insolvent (worried) borrowers among self-employed and small business owners who have suffered damage from COVID-19.
It was designed with a structure similar to the personal debt reconciliation system of the Credit Restoration Committee, but the principal reduction rate is 10 percentage points (p) higher than the personal debt adjustment system in consideration of the special situation of COVID-19. up to 90%).
However, only those with more liabilities than assets can receive support.
Officials from the second financial sector said that most of the ‘borrowers concerned regarding insolvency’ set by the Financial Services Commission as the target of support are customers of the second financial sector, and there are not many cases where they are classified as ‘normal borrowers’ by their own standards.
An official from a savings bank said, “From the point of view of a savings bank, borrowers who are concerned regarding insolvency are everyday customers.
In response to this, Jeon Je-ho, head of the Financial Policy Division at the FSC, said, “I understand that the second financial sector is concerned that the lowered interest rate will be set lower than the funding rate if debt adjustments are made for bonds that are less than 90 days overdue. We are discussing with the Korea Savings Bank Federation to set the rate higher than the interest rate, and it is in the final stages,” he explained.
An official from a capital company mentioned that the FSC divided the criteria for ‘borrowers concerned regarding bad debt’ into two in a tentative plan prepared with financial companies.
The official said, “If the number of delinquent days falls under Standard 1, an interest rate of approximately 9% per annum is applied, and if the number of delinquent days falls under Criterion 2, an interest rate of 3-5% per annum is applied. There is,” he feared.
In response, the FSC countered that the provisional bill is not a confirmed number, and that the claim that there may be a phenomenon of concentration is ‘the view of the financial institutions (creditors)’.
Director Byun dismissed “the debt adjustment system operated by the Credit Recovery Commission also has different interest rates depending on the number of delinquent days, but there is no tendency to focus on programs with greater benefits.”
He also said, “There is a principle that excludes loans within six months of implementation from debt adjustment support, so strategic applications can be prevented,” he said.
Some have pointed out that it is necessary to consider the soundness aspect as the speed of loan growth in the second financial sector has increased unusually since Corona 19.
Kwon Dae-young, head of the Financial Policy Bureau of the Financial Services Commission, said, “I understand the concerns of the second financial sector, but over the past two years and six months, when total loans to individual businesses increased by 44%, loans from the second financial sector increased by 71%. We are closely monitoring the soundness of the second financial sector as it might become insolvent.”
He also said, “We are promoting policies in terms of restoring the soundness of the financial sector through the system (startup fund) and opening the way to credit recovery through debt adjustment.”
The FSC explained that it took into account the individual differences in the period of time that can withstand the damage caused by COVID-19 in response to the criticism that it is too long to leave the application period for the Startup Fund at three years.
Director Byun said, “Each person’s ability to withstand the damage from the corona virus will be different.” He said, “We are not only supporting those who have already fallen, but are also supporting those who are struggling to survive and fall.”
The application period is three years, but an individual can apply only once.
The FSC plans to announce the final draft of the new start fund as early as next week following consultation with the financial sector.
/yunhap news
