Financial Services Commission Chairman Ko Seung-beom attended the financial industry association presidents' meeting held on the 23rd at the Korea Federation of Banks in Jung-gu, Seoul, where he held a discussion on maturity extension and repayment deferral measures with financial industry association presidents including Kim Kwang-soo, President of the Korea Federation of Banks; Jeong Hee-soo, President of the Life Insurance Association; Jeong Ji-won, President of the General Insurance Association; Kim Joo-hyun, President of the Credit Finance Association; Oh Hwa-kyung, President of the Korea Federation of Savings Banks; Yoon Jong-won, President of Industrial Bank of Korea; and Lee Dong-geol, President of KDB Industrial Bank.
[Asia Economy Reporter Song Hwajeong] The extension of loan maturities and principal and interest repayment deferrals for small and medium-sized enterprises (SMEs) and small business owners in the financial sector has been extended by an additional six months and will end at the end of September. Ko Seung-beom, Chairman of the Financial Services Commission, said, "The six-month extension will serve as a strong safety net allowing small business owners and self-employed individuals to focus solely on business recovery without the burden of loan repayments."
On the 23rd, the Financial Services Commission held a meeting with major financial industry associations and policy financial institutions and announced the final decision to extend the financial sector’s loan maturity extension and repayment deferral measures.
On the same day, Chairman Ko said at the 'Extension of Loan Maturity and Repayment Deferral Measures' meeting with financial industry association heads held at the Korea Federation of Banks, "All financial sectors have agreed through close consultations to extend the loan maturity extension and repayment deferral measures, which were scheduled to end at the end of March, by an additional six months until the end of September," adding, "It is now a time when more systematic preparation and response are needed for the situation after these measures end in October." Chairman Ko emphasized, "Even after the loan maturity extension and repayment deferral measures end, it is crucial to support the smooth landing of SMEs and self-employed individuals so that they do not face excessive repayment burdens or a sudden decrease in financial accessibility," and added, "Since there is a possibility that the accumulated potential non-performing loans may materialize depending on the pace of improvement in the business conditions of small business owners and the self-employed, it is necessary to secure proactive crisis response capabilities."
According to the Financial Services Commission, from April 2020 to January this year, the principal and interest of loans that received maturity extension and repayment deferral measures amounted to 291 trillion KRW (1.165 million cases). Of this, maturity extensions accounted for 276.2 trillion KRW (1.054 million cases), principal repayment deferrals 14.5 trillion KRW (94,000 cases), and interest repayment deferrals 244 billion KRW (17,000 cases). As of the end of January, the outstanding loan balance was 133.4 trillion KRW (704,000 cases), with maturity extensions at 116.6 trillion KRW (655,000 cases), principal repayment deferrals at 11.7 trillion KRW (37,000 cases), and interest repayment deferrals at 5 trillion KRW (12,000 cases).
Measures for the smooth landing of repayment-deferral loans and the enhancement of these measures are also being operated without disruption. Among the loans receiving principal and interest repayment deferrals (16.7 trillion KRW), 54% (9 trillion KRW) have undergone one-on-one pre-consultations with financial companies, and one-third (3 trillion KRW) of the loans that received pre-consultations have started loan repayments.
With this extension, SMEs and small business owners who have suffered direct or indirect damage from COVID-19 and have no defaults such as principal and interest arrears, capital erosion, or business closure can apply for loan maturity extension and repayment deferral measures until the end of September this year. SMEs and small business owners who previously applied for these measures can reapply if their maturity or deferral period ends within the extension period. The existing asset soundness classification standards for loans under maturity extension and repayment deferral will remain unchanged. Policy financial institutions (Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea, Korea Credit Guarantee Fund, Korea Technology Finance Corporation, Regional Credit Guarantee Foundations) will also implement maturity extensions and interest repayment deferrals upon borrower application for loans and guarantees maturing by the end of September for SMEs and small business owners.
A Financial Services Commission official said, "The financial sector will continue to extend the loan maturity extension and repayment deferral measures without disruption, promote pre-consultations to ensure that SMEs and small business owners do not face temporary repayment burdens after the measures end, and encourage sufficient provisioning for potential loan losses to respond to the expansion of latent non-performing loans in the financial sector," adding, "In addition, we will work closely with the transition committee to prepare customized support measures tailored to each borrower’s situation without delay."
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