Saemaeul Geumgo has launched a 'lender consortium' in response to concerns over potential defaults on real estate project financing (PF) loans.
On the 23rd, the Saemaeul Geumgo Central Association announced that it is discussing plans to establish a real estate PF lender consortium through a voluntary agreement with approximately 1,300 regional Geumgo branches. A representative from the Saemaeul Geumgo Central Association stated, "It is being organized in a way that involves all Saemaeul Geumgo branches."
The voluntary agreement is expected to include procedures and requirements for support to normalize operations in case of defaults at PF project sites. For example, if a liquidity crisis occurs at a project site financed by a specific Saemaeul Geumgo branch, other branches will provide additional liquidity to revitalize and complete the project. The representative added, "It will follow a method similar to the voluntary agreement used by savings banks."
Savings banks previously established a 'voluntary agreement' to efficiently respond to defaults at PF project sites. If three or more savings banks have provided loans, and at least two-thirds of them agree?both in terms of the number of banks and loan balance?the remaining banks cannot oppose extending the loan maturity for the project site.
Recently, concerns have been raised about the possibility of defaults related to Saemaeul Geumgo's construction and real estate loans. According to the office of Oh Young-hwan, a member of the Democratic Party of Korea, the outstanding loan balance for Saemaeul Geumgo's managed land trust project loans was only 169.4 billion KRW in 2019, but increased to 9.0992 trillion KRW by the end of 2021, 15.5079 trillion KRW by the end of last year, and 15.7527 trillion KRW as of January this year. Delinquent loans rose nearly tenfold from 6 billion KRW at the end of 2021 to 60.2 billion KRW at the end of last year. As of January this year, delinquent loans reached 111.1 billion KRW. Managed land trust loans are considered to have an additional safety measure as they secure a priority beneficiary status over trust assets, but broadly speaking, they are a type of PF loan extended based on future project viability.
However, regarding this matter, the Saemaeul Geumgo Central Association and the Ministry of the Interior and Safety, which supervises Saemaeul Geumgo, maintain that the situation is manageable. The Ministry of the Interior and Safety stated, "Although loan delinquencies are increasing due to the real estate market downturn, the level is manageable," and added, "We are checking the status of real estate-related loans weekly and continuously monitoring the situation."
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