[Financial Services Commission Report] Eun Seong-su: "Extension of Loan Maturity and Interest Repayment Deferral for Small Business Owners Unavoidable"

"Is It Right to Demand 'Full Repayment' from Struggling Borrowers?"
"Need to Consider COVID-19 Quarantine Situation and Real Economy Trends"

Eun Sung-soo, Chairman of the Financial Services Commission

[Asia Economy Reporter Kim Hyo-jin] Eun Sung-soo, Chairman of the Financial Services Commission, expressed the view that it is inevitable to extend once again the financial sector's loan maturity extension and interest repayment deferral measures for small business owners and small and medium-sized enterprises (SMEs) affected by the novel coronavirus infection (COVID-19).

According to financial authorities on the 19th, Chairman Eun stated at an online 2021 business plan briefing held the previous day, "We need to comprehensively consider the current (COVID-19) quarantine situation, real economy trends, and the financial sector's capacity to endure," making such remarks.

The financial authorities initially extended the loan maturity extension and interest repayment deferral measures for small business owners affected by COVID-19, which were originally until September last year, once more until March. The financial authorities are discussing with the financial sector the possibility of extending these measures once again.

He said, "Last week, the government provided 1 million won or 3 million won to struggling small business owners, and I understand that almost all of it was claimed on the first and second days," adding, "That shows how much difficulty small business owners are generally facing, so I wonder if it is right to tell them to repay all their debts."

In the banking sector, while there is general agreement on the necessity of an additional loan maturity extension, there is reluctance to further defer interest repayments. The reason is that if interest repayments are not made, it becomes difficult to assess the soundness of loans, which could lead to significant risks in the future, so proactive and appropriate selection is necessary.

Regarding this point, Chairman Eun explained, "(Among the supported small business owners, etc.) not all are failing to pay interest," adding, "Out of a total of 400,000 cases including maturity extensions, only 13,000 cases are not paying interest, and the rest have paid. This is a very surprising fact."

He added, "Some say that deferring interest repayments would prevent proper selection, but in reality, many borrowers are paying interest," and "I understand that banks are monitoring the companies they deal with (through payment of public charges, etc.)."

Chairman Eun said, "Considering the soundness and profitability of the financial sector, it is a situation where (the deferral measures) can be sufficiently endured," and "We will consult well with the financial sector going forward." He also added, "We are also considering ways to ensure a soft landing so that borrowers are not burdened even after the measures end."