"'Corona Loan' Maturity Extension Likely... Financial Authorities and Commercial Banks to Discuss Details Today (Comprehensive)"

Financial Services Commission Meets with Deputy Heads of Major Banks to Coordinate Periods and Other Details

Reference image (Source=Yonhap News)

[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 disease (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 vice presidents of major commercial banks, to discuss specific details for the additional extension of 'COVID loans' maturities.

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 are reportedly consolidating their position to activate a loan maturity additional extension program.

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

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

Financial Services Commission Chairman Eun Sung-soo previously hinted at the possibility of extension after attending an event on the 26th of last month, telling reporters, "If the COVID situation prolongs, we cannot suddenly withdraw in September, so (we are considering whether to extend further)."

Since then, the financial authorities have gauged the opinions of commercial banks regarding the validity and possibility of further loan maturity extensions. A banking sector official explained, "Generally, there is agreement 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 deferrals being implemented alongside the loan maturity extensions.

Another banking sector official said, "The currently implemented extension and deferral measures could impose significant burdens on both banks and borrowers in the future," adding, "The idea is to proactively reduce risk factors as much as possible, and the authorities are understood to be considering accepting such measures."

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. Of these, 68%, or 41.7 trillion won, were extended 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.