President and Ruling and Opposition Parties Pressure Financial Services Commission
De Facto 'Maturity Extension End' Postponement Expected
Postponements Occur as Confirmed Cases Surge Before Maturity Extension Ends
This Time, High Interest Rates and Economic Downturn Are Obstacles
Financial Services Commission Likely to Decide Extension Method and Announce Position by Next Week
"I hope the extension is not just a short one but a longer one. Since interest rates have risen significantly, please also consider adjusting the rates." (Kim Tae-nyeon, Democratic Party of Korea lawmaker)
"The situation for self-employed individuals is quite worrisome. Considering the opinions of both ruling and opposition parties and the president's request, we are guiding a soft landing." (Kim So-young, Vice Chairman of the Financial Services Commission)
At 11 a.m. on the 19th at the 19th-floor meeting room of the Seoul Government Complex, six lawmakers from the Democratic Party of Korea's Committee for Crisis Measures for the Livelihood Economy visited the Financial Services Commission. Their goal was to continue the extension of the maturity extension measure for small business loans, which is set to end at the end of this month. The meeting lasted nearly an hour, exceeding the scheduled 30 minutes. Earlier that morning, Sung Il-jong, chairman of the People Power Party's Policy Committee, also stated, "The maturity extension measure will end at the end of this month, but there are those who wish for an extension. It is necessary to grant a period."
Since President Yoon Suk-yeol requested on the 15th during a luncheon meeting with the Financial Services Commission chairman and others that "financial authorities actively consult with the financial sector to ensure that repayment burdens do not increase" regarding the financial support ending this month, both ruling and opposition parties have been putting comprehensive pressure on the Financial Services Commission.
The Financial Services Commission, which has basically decided to defer the maturity extension, plans to announce the extension method within next week. A senior official from the Financial Services Commission said, "We are coordinating with banks regarding the maturity extension." Banks are also reluctantly following suit. A representative from a commercial bank said, "The authorities have instructed us to set aside special loan loss provisions to prepare for defaults, so we are examining risk factors from various angles."
It May Not Be an Unconditional Extension...Possibility of Limited Support
On the 12th, self-employed business owners affiliated with the Small Business Federation held a rally near the Presidential Office in Yongsan-gu, Seoul, urging the expansion of the criteria for loss compensation payments. Photo by Jinhyung Kang aymsdream@
The measure to extend the maturity of small business loans and defer repayments began in April 2020. It was an extreme remedy introduced after COVID-19 hit and small business owners were severely affected. As of the end of January this year, the total outstanding balance of small business loans that received maturity extensions and principal and interest support was 133.3 trillion won. If these debts are not repaid, it would directly lead to bank insolvency, but it was an unavoidable choice.
A Financial Services Commission official said, "During the four times the extension was granted every six months, the number of confirmed cases always surged sharply at the end of the extension period, making it impossible to stop support," adding, "Although social distancing has now been completely lifted, this time high interest rates and economic downturn have become obstacles." This upcoming extension would be the fifth.
The extension method is expected to differ from before. In the past, extensions were granted without question, but as Financial Supervisory Service Governor Lee Bok-hyun said at a press briefing on the 15th, "We will not extend under the same conditions," indicating that this time the measure will likely be limited. Borrowers are divided into three groups: those requesting maturity extension, principal repayment deferral, and interest repayment deferral. Tailored support measures are expected to be provided according to the characteristics of each group. Since there are high concerns in the financial sector about the group unable to even pay interest, the risk of potential bank insolvency will be reduced, and the debt burden on small business owners, as demanded by the political sphere, will also be alleviated.
Financial Services Commission, Which Officially Announced End of Maturity Extension...Must Reverse Position
Financial Services Commission Chairman Kim Ju-hyun attended the full meeting of the Political Affairs Committee held at the National Assembly on the 28th and drank water as if feeling anxious. Photo by Yoon Dong-joo doso7@
The Financial Services Commission, which officially announced the end of the maturity extension in July, has a complicated stance. "We have already extended the maturity extension and repayment deferral four times, and extending it again could cause bigger problems. We initially decided to buy time, but now we must not continue that way," said Financial Services Commission Chairman Kim Ju-hyun on July 14, indicating that they have no choice but to reverse their previous statement.
A financial sector official said, "The Financial Services Commission may not officially mention the extension and leave it to banks to decide on their own, but behind the scenes, they might coordinate to 'definitely extend' it."
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