2023-04-16 13:21:00
About 300 to 500 real estate PF business sites across the country are ‘managed’… Government agencies such as the Financial Supervisory Service emphasize “monitoring strengthened… timely response when necessary”
The possibility of insolvency in real estate project financing (PF) due to the economic recession and continuing high interest rates, which have been raised since the end of last year, is still not extinguished. First of all, securities companies are the source, but the possibility of insolvency of non-banking financial companies such as Saemaul Geumgo and savings banks is constantly being raised.
Lee Bok-hyun, head of the Financial Supervisory Service, once once more emphasized at the conference center of the Federation of Korean Industries in Seoul on the 13th that he would preemptively respond to the possibility of a real estate project financing (PF) crisis.
Director Lee said, “We will actively and boldly respond so that finance can play a role as a support for the economy by expanding the loss absorption capacity of financial companies and identifying potential risk factors such as real estate PF in advance and responding preemptively.”
However, Director Lee diagnosed that “internal and external conditions surrounding Korean finance are still difficult, such as increasing volatility in the global economy and growing concerns regarding real estate PF.”
Earlier, on the 5th, Director Lee announced that the government is actively taking care of poor management, saying that regarding 300 to 500 real estate PF business sites across the country are designated and managed as important business sites for management.
The International Monetary Fund (IMF) also warned in a recent report that “there are risk factors” regarding Korea’s P.
The recent rise in the possibility of PF defaults in the real estate market is due to the increased risk of defaults on bridge loan loans by securities companies, especially in rural areas, as unsold pre-sold homes increased due to the economic downturn.
Bridge Loan is a ‘bridge’ in that it serves as a bridge to full-fledged PF with funds used mainly to pay off the balance of land purchase by raising short-term loans from financial institutions for developers who lack funds in the early stage of business. It is called.
According to the “Financial Stability Situation in March 2023” report released by the Bank of Korea on the 23rd of last month, as of the end of September of last year, the total real estate PF exposure (risk exposure) in the non-bank sector reached 115 trillion won.
In particular, in the case of securities firms, exposure to PF loans is worth 28.5 trillion won, but the risk of insolvency has increased as the delinquency rate has risen by more than twice (3.7% → 8.2%). The delinquency rate of PF loans from securities companies was regarding 20 times higher than that of insurance companies (0.4%), the highest among non-banking sectors.
The Bank of Korea said, “Recently, most of the cases of insolvency in bridge loans are in rural areas,” adding, “In the local real estate market with a weak location, securities companies with large exposures due to sales failure are exposed to the risk of loss first.”
Malicious rumors are also spreading in some cases. On the 12th, a false fact was circulated, centering on the financial district, that “Withdrawal of deposits from Welcome and OK Savings Bank will be suspended due to real estate PF losses.”
Financial Services Commission Chairman Kim Joo-hyun immediately issued related explanatory materials following the executive meeting on the 14th and said, “Strictly deal with malicious rumors that cause confusion in the financial market.” As such, please make special efforts to manage policy messages.”
Although the FSC has drawn the line, concerns over PF are not dispelled. Experts say, “The biggest risk factor for the Korean economy is the possibility of insolvency of real estate PF loans.”
The government is also taking a closer look at the impact of real estate PF loans on the financial system in the future and is actively responding by strengthening monitoring.
This also includes the fact that business sites concerned regarding insolvency will operate a PF lender agreement so that complex rights relationships between stakeholders in real estate PF can be quickly adjusted. The creditor group decided to include mutual financial companies such as Saemaul Geumgo, Credit Union, and Nonghyup, reflecting the recently changed PF business structure.
Previously, the Ministry of Strategy and Finance and the Bank of Korea held an emergency macroeconomic and financial meeting on the 14th of last month to examine the ripple effects of the bankruptcy of Silicon Valley Bank (SVB) in the domestic and foreign financial markets.
Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho, Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service Governor Lee Bok-hyeon, and Bank of Korea Vice Governor Lee Seung-hun attended the event.
A government official said, “Recently, the risk of insolvency related to real estate PF is increasing, centered on some non-bank financial institutions, but compared to the past savings bank crisis, the degree of insolvency is not large.” When considering comprehensively, it is evaluated as sufficiently manageable with active responses from the government or related organizations.”
“We will continue to monitor and cooperate with related agencies,” he said.
Reporter Jeong Yeon-mi [email protected]
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