[Exclusive] 'Corona Loans' Maturity to Be Extended Again... Financial Authorities and Commercial Banks Hold Meeting Today

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[Asia Economy Reporter Kim Hyo-jin] Financial authorities have decided to further extend the loan principal repayment deadlines for small business owners and small and medium-sized enterprises (SMEs) affected by the novel coronavirus infection (COVID-19). On the 8th, the financial authorities will meet with banks to begin detailed discussions and coordinate the final extension deadlines.

According to financial authorities and the financial sector, the Financial Services Commission held a private meeting on the afternoon of the same day at the Government Seoul Office in Jongno-gu, Seoul, attended by officials from related agencies such as the Financial Supervisory Service and deputy general manager-level executives from major commercial banks to discuss specific matters for the additional extension of the 'COVID loans' maturity.

As the COVID-19 situation enters a prolonged phase, the financial authorities have judged that continuous financial support for small business owners and SMEs with weak financial capacity is inevitable, and it is known that they have settled on operating a loan maturity additional extension program.

A financial sector official said, "This meeting can be seen as confirming this stance and preparing for full-scale practical progress." It is expected that the maturity will be extended for about three months until the end of this year or up to six months until March next year, and measures such as monitoring the unfolding situation will be discussed.

The government implemented a plan in March through an agreement with the financial sector to extend the loan maturities of small business owners and SMEs facing financial difficulties due to the impact of COVID-19 by six months until the end of September after a certain review process.

Financial Services Commission Chairman Eun Sung-soo previously expressed at an event on the 26th of last month, "If the COVID situation prolongs, we cannot suddenly wash our hands and exit just because it is September," indicating the possibility of an extension.

Since then, the financial authorities have inquired about the validity and possibility of an additional loan maturity extension with commercial banks. A banking sector official explained, "Generally, there is consensus on the necessity of additional extension measures, and there is an atmosphere of maximum cooperation with the direction set by the authorities."

However, commercial banks are reportedly requesting the financial authorities to devise a 'soft landing' plan to minimize future side effects related to the interest repayment deferral, which is being implemented alongside the loan maturity extension.

Another banking sector official said, "The currently implemented extension and deferral measures could become a considerable burden not only for banks but also for borrowers in the future," adding, "The idea is to proactively reduce risk factors as much as possible, and I understand that the authorities are also considering accepting such a plan."

According to the Financial Services Commission, from February 7, when the first financial support measures related to COVID-19 were announced, until the 3rd of this month, a total of 195,000 cases amounting to 61.2 trillion won in loan maturities have been extended across commercial banks, policy financial institutions, and the secondary financial sector. Among these, 68%, or 41.7 trillion won, of the maturity extensions were carried out by commercial banks.

The financial authorities plan to soon expand discussions to all financial sectors. Considering concerns about potential financial sector insolvency due to additional loan maturity extensions, they are also reviewing the possibility of extending the capital regulation relaxation measures, which were set to apply until September.