[Exclusive] Savings Banks' 'New Start Fund Non-Performing Loans'... Samil Leads Evaluation

Discount Rate of 5~9% on Present Value of Substandard and Doubtful Loans
Savings Banks Industry: "Not a Fire Sale but Certainly a Loss"
Financial Authorities' Directive Accelerates Sae Chulbal Fund Sale Process

At the launch ceremony of the New Start Fund held last October at the Korea Asset Management Corporation Yangjae Tower in Seocho-gu, Seoul, key officials including Kim Ju-hyun, Chairman of the Financial Services Commission, and Lee Young, Minister of SMEs and Startups, are posing for a photo. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporters Seungseop Song and Eunju Lee] It has been confirmed that Samil Accounting Corporation led the evaluation of non-performing loans (NPLs) that savings banks transfer to the New Start Fund. While it is assessed that the loans are sold at a reasonable price to some extent, there are still complaints that the losses are greater compared to selling to private companies. However, since this is a policy that financial authorities are focusing on, the industry has begun selling NPLs.

According to a comprehensive report by Asia Economy on the 6th, Samil Accounting Corporation decided how to evaluate the NPLs and at what price they would be traded between Korea Asset Management Corporation (KAMCO) and savings banks. The New Start Fund is a debt adjustment program for self-employed borrowers who suffered damage due to COVID-19 business restrictions. When financial companies sell NPLs to KAMCO, KAMCO adjusts the debts of the borrowers whose NPLs it has acquired.

The issue lies in the price at which the NPLs should be transferred to KAMCO. Even before the launch of the New Start Fund, there were significant concerns in the savings bank industry that the loans might be sold at a bargain price. There were even voices saying that the financial authorities were "twisting the arms of financial companies." To prevent such controversies in advance, the financial authorities decided to have the evaluation of NPLs determined through accounting firms.

This time, it is known that multiple accounting firms formed a consortium to establish the evaluation standards for NPLs. The evaluation was conducted by broadly dividing loan claims into unsecured and secured, and then further categorizing them into potentially non-performing loans, borrower-requested NPLs, and NPLs collectively transferred by financial companies. However, unsecured NPLs collectively transferred by financial companies must be transferred according to the purchase rate table. When evaluating the present value of the claims, a discount rate of 5-9% is applied.

Within the savings bank industry, there is a general consensus that the prices set are higher than initially feared. This means that the loans are not sold at bargain prices as much as expected. However, there are complaints, especially from large savings banks, that they are still incurring losses compared to selling to private companies. In particular, there is a strong voice that the purchase rate table-determined unsecured loan claims are not being sold at their true value during the sales process.

A savings bank official said, “Depending on various factors such as the borrower's delinquency period and the amount borrowed, unsecured loans are often sold at 10-15% of the loan claim value,” adding, “Among loan claims in relatively good condition, prices up to 20% can be expected, but that is not happening.” Another savings bank official explained, “It is not a bargain price, but it is not as much as when selling to private companies,” and added, “Since this is a government-driven policy and there have been many requests to cooperate, we are cooperating.”

The savings bank industry has started the process of transferring NPLs to the New Start Fund. Sangsangin Savings Bank announced on the 29th of last month that it transferred some unsecured credit loans and secured NPLs to the New Start Fund. OK Savings Bank also sold part of the New Start Fund application claims to the New Start Fund on the 2nd.