Lee Bok-hyun, Video Conference During US Business Trip
"Need to Accelerate PF Soft Landing Measures"
Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), currently on a business trip in New York, urged for the swift implementation of a soft-landing plan regarding domestic real estate project financing (PF) issues, noting that overseas investors are showing high interest.
On the 16th, Governor Lee held a market trend review meeting via video conference connecting the FSS headquarters in Seoul with its offices in New York and London. The meeting was organized to diagnose the market situation related to real estate and financial markets, especially concerning real estate PF, and to discuss future response measures.
The financial authorities announced the "Real Estate PF Soft-Landing Plan" on the 13th. Market experts expect that the clear announcement of business feasibility evaluation criteria in this measure will help the market independently distinguish between good and bad assets and prepare accordingly, thereby reducing uncertainty. Even after the announcement of the PF soft-landing plan, the PF-asset-backed commercial paper (ABCP) of financial investment companies has been smoothly refinanced with stable issuance rates, showing no abnormal signs in the funding market.
Foreign investors have also continuously shown confidence in the fundamentals of the Korean economy, evidenced by six consecutive months of net buying in the KOSPI market, leading to an overall robust financial market. However, Governor Lee requested careful management, noting that losses among some vulnerable small and medium financial firms or construction companies during the process of clearing PF projects lacking business feasibility could attract market attention.
Governor Lee emphasized that this measure is an important opportunity to resolve market uncertainty and promote the virtuous cycle of funds in the PF market. He stated, "Strict selection between good and bad assets is the first step toward PF normalization," and urged, "Financial companies must be thoroughly managed to strictly evaluate according to the improved evaluation criteria."
He further explained, "We will strengthen post-management through on-site inspections to ensure visible results from the soft-landing plan for PF, such as auction sales and substantial restructuring and liquidation of projects lacking business feasibility. We will also promptly implement incentives for expanding demand bases in the private sector, such as syndicated loans, restructuring, and new fund supply."
Governor Lee plans to hold an additional meeting with the construction industry within this month to actively communicate with PF market participants. He intends to conduct a detailed analysis of the soundness and liquidity status of financial companies sensitive to PF and closely monitor PF-ABCP, construction bond issuance and repayment, and interest rate trends. He said, "If the orderly soft-landing plan for real estate PF is executed as planned, it will greatly help strengthen overseas trust in Korea's financial system."
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