Financial Services Commission and Financial Association Agree to Extend 'COVID-19 Support' for 6 Months

Sharing the '5 Key Principles for Soft Landing Support'

[Image source=Yonhap News]

[Asia Economy Reporters Wondara and Song Seungseop] The Financial Services Commission and heads of financial associations have agreed to extend the 'COVID-19 financial support' for an additional six months. Previously, the Financial Services Commission reached this agreement after meeting with banks and policy financial institutions. The Commission also shared a soft landing principle that allows borrowers to decide the timing and method of repayment.

On the afternoon of the 22nd, after a meeting between Financial Services Commission Chairman Eun Sungsoo and financial association heads at the Korea Federation of Banks building in Jung-gu, Seoul, the Financial Services Commission stated in a press release, "As COVID-19 uncertainties continue, there is a consensus on the need to extend the maturity extension and repayment deferral measures by six months." It added, "To prevent the borrower's burden from concentrating all at once after the deferral ends, we will provide optimal situational consulting based on the 'Five Principles of Soft Landing Support.'"

The five agreed-upon soft landing support principles are: ▲ Providing optimal repayment plan consulting considering the borrower's situation ▲ Granting a repayment period longer than the deferral period when principal and interest are repaid in installments during the deferral; if the remaining maturity is shorter than the deferral period, allowing maturity extension ▲ Maintaining the total amount of interest accrued during the deferral period regardless of repayment method and period (no interest charged on deferred interest) ▲ Allowing early repayment without prepayment fees if the borrower wishes to repay earlier than originally planned ▲ The borrower has the final choice on the repayment method and period.

The Financial Services Commission announced plans to establish and operate a policy decision system to gradually normalize COVID-19 financial response measures. The Commission will build a system that comprehensively considers quarantine status, the real economy, and financial stability, and plans to regularly provide market participants with 'forward guidance'?the policy authorities' situation assessment and response direction.

Additionally, discussions were held on policy-type New Deal fund investments, digital financial innovation, and the activation of mid-interest loans following the reduction of the maximum interest rate. A Financial Services Commission official said, "Participants agreed on the need to simultaneously extend financial regulatory flexibility measures to minimize the financial sector's burden due to maturity extensions and repayment deferral extensions," and added, "They expressed a welcoming stance that the authorities' forward guidance will help minimize uncertainty and enhance predictability in the current crisis situation." Attending the meeting were Chairman Eun, along with Kim Kwangsoo, Chairman of the Korea Federation of Banks; Jung Heesoo, Chairman of the Life Insurance Association; Jung Ji-won, Chairman of the General Insurance Association; Kim Juhyun, Chairman of the Credit Finance Association; and Park Jaesik, Chairman of the Korea Federation of Savings Banks.