Ahn Cheol-soo: "Create a Bad Bank to Solve Self-Employed Debt"

"6-Month Extension Maturity Means 6-Month Deadline"... Repayment Plan for Overdue Loans Equivalent to Mortgage Loans

[Image source=Yonhap News]

[Asia Economy Reporter Baek Kyunghwan] Ahn Cheol-soo, chairman of the Presidential Transition Committee, has ordered the consideration of establishing a 'bad bank' dedicated to distressed assets to support small business owners and self-employed individuals. The purpose is to help self-employed people affected by COVID-19 by allowing them to repay overdue loans at low interest rates over a long period.

On the 31st, Chairman Ahn stated at the sectoral work report held at the Transition Committee office in Tongui-dong, Jongno-gu, "Please consider a plan to create a kind of bad bank jointly funded by the Small Enterprise and Market Service, the government, and banks." A bad bank refers to a bank that specializes in handling distressed bonds or assets by purchasing only the non-performing loans or assets of financial institutions to clean up their bad debts.

On the same day, Chairman Ahn revealed the background for introducing the bad bank, saying, "Extending the loan maturity for small business owners and the self-employed has temporarily put out the urgent fire, but unfortunately, the six-month extension is a six-month deadline." He added, "As of the end of January this year, the non-performing loans of small business and self-employed loans amount to 133 trillion won, and the principal and interest of loans for which the financial authorities have extended maturity and deferred repayment since April 2021 total 291 trillion won."

Accordingly, Chairman Ahn said, "Please actively consider in the relevant sectors a plan to create a kind of bad bank to repay overdue loans at low interest rates over a long period, similar to mortgage loans." He continued, "Although the IMF (International Monetary Fund) regime ended in 2001, we remember that the number of credit delinquents soared to a maximum of 3.82 million by 2004," and emphasized, "There is already a plan to create a special fund to resolve the debts of small business owners and the self-employed as a campaign pledge of the president-elect."

Previously, President-elect Yoon Suk-yeol also pledged during the presidential election campaign to create a special fund to resolve the debts of small business owners and the self-employed. Yoon promised, "If the situation worsens to the point where loan defaults occur comprehensively, we will consider establishing a fund similar to the non-performing loan fund during the foreign exchange crisis."