Last Year ABS Issuance Fell 29%... "Impact of Interest Rate Hikes"

Korea Housing Finance Corporation Issued MBS Down 53%

[Asia Economy Reporter Lee Jung-yoon] The Financial Supervisory Service announced on the 26th that the registered issuance amount of Asset-Backed Securities (ABS) last year was 44 trillion won, a 28.7% decrease compared to the same period the previous year.

By asset holders, issuance by Korea Housing Finance Corporation and general corporations decreased, while issuance by financial companies increased. In particular, Korea Housing Finance Corporation issued 17.2 trillion won worth of Mortgage-Backed Securities (MBS) last year, which is a 53% decrease from the previous year.

MBS issuance sharply declined compared to 2021 due to a decrease in policy mortgage loan supply caused by rising interest rates and a slowdown in the housing market. MBS issuance has been continuously decreasing since the second quarter of 2021, and MBS issuance based on Safe Conversion Loans and others was scheduled for the first half of this year. MBS are issued based on mortgage bonds as underlying assets and are handled by the Housing Finance Corporation domestically.

General corporations issued ABS worth 8.2 trillion won, based on installment payment claims for devices and real estate project financing (PF), a 12.5% decrease compared to the same period last year.

On the other hand, financial companies issued ABS worth 18.7 trillion won, an 18.3% increase. Banks issued 2 trillion won, based on non-performing loans (NPL), a 17.5% decrease, while specialized credit finance companies issued 11.3 trillion won, based on card receivables and others, a 45.5% increase. Securities companies issued Primary Collateralized Bond Obligations (P-CBO) worth 5.4 trillion won, based on corporate bonds, a 3.8% decrease compared to the previous year.

The Financial Supervisory Service explained, "Due to rising interest rates, ABS issuance surged as a funding channel for specialized credit finance companies that find it difficult to issue specialized credit finance bonds," adding, "The total P-CBO issuance amount during last year was 5.4 trillion won, a slight decrease compared to the previous year, of which the COVID-19 recovery P-CBO issuance amount was 4.1 trillion won, a 300 billion won decrease from the previous year."

Looking at the amounts by securitized underlying assets, issuance of loan receivable-based ABS and corporate bond-based P-CBO decreased. Loan receivable-based ABS issuance decreased by 46.3% to 21.3 trillion won, and P-CBO issuance based on corporate bonds and others decreased by 3.8% to 5.4 trillion won. Conversely, sales receivable-based ABS issuance increased by 15.9% to 17.2 trillion won.