The financial authorities have completed the first phase of temporary financial regulatory easing, which runs until the end of the year, by issuing non-action opinions on some tasks that can be prioritized for the restructuring of real estate project financing (PF).
The Financial Services Commission announced on the 30th that it has completed issuing non-action opinions for six tasks that can be prioritized, related to the "Future Policy Directions for the Orderly Soft Landing of Real Estate PF" announced on the 14th. A non-action opinion is a document in which the Financial Supervisory Service confirms that it will not take any sanctions or other measures in the future based on relevant laws and regulations regarding transactions that financial companies intend to carry out.
The six measures eased in the first phase include ▲exemption exceptions related to new fund supply, restructuring, and liquidation ▲temporary relaxation of the net capital ratio (NCR) risk weight for residential real estate loans ▲temporary relaxation of the NCR risk weight related to the conversion of debt guarantees into loans ▲relaxation of securities holding limits related to PF loans ▲relaxation of credit provision limits within business areas ▲partial relaxation of joint loan handling standards for restructured loans, among others.
Regarding the exemption exceptions for financial companies, this applies an exemption under the "Regulations on Inspection and Sanctions of Financial Institutions" so that financial companies can carry out PF site liquidation, restructuring, or new fund supply without fear of sanctions due to future losses. The issued non-action opinions include a provision that the exemption exception will be applied temporarily until December 31 of this year.
The relaxation of the NCR risk weight for residential real estate loans is a measure to ease liquidity and soundness management burdens related to securities companies' new fund supply during the normalization process of real estate PF. From the date the non-action opinion is issued until the end of this year, comprehensive financial investment business operators can apply a relaxed NCR risk weight (60%) to newly handled domestic residential real estate loans.
The temporary relaxation of the NCR risk weight related to the conversion of debt guarantees into loans is intended to respond to the expansion of liquidity risk and financial tightening of securities companies that may occur due to changes in market conditions. Securities companies that convert real estate debt guarantees into loans as of the end of March will have the NCR risk weight for those loans relaxed (32%) until the end of the year.
The relaxation of securities holding limits related to PF loans and the relaxation of credit provision limit regulations within business areas are measures for the savings bank sector. The former exempts savings banks from related measures under the Mutual Savings Banks Act until the end of the year if they exceed securities holding limits (within 100% of capital) or collective investment securities holding limits (within 20% of capital) due to PF non-performing loan liquidation or investment in normalization funds. The latter exempts from current law measures until the end of the year if the mandatory loan ratio regulation within business areas (50% in the metropolitan area, 40% in non-metropolitan areas) is violated within 5 percentage points due to a decrease in total loans through real estate PF acquisition or sale.
The relaxation of joint loan handling standards for restructuring purposes is a measure targeting the mutual finance sector. When mutual finance institutions, which are existing major lenders, handle balance payment loans during site restructuring through auctions, they will not be subject to some provisions of the joint loan model regulations until the end of the year if certain conditions are met.
The authorities plan to complete the remaining temporary regulatory easing measures by the end of next month, including ▲allowing normal classification of asset soundness when supplying new funds ▲rationalizing K-ICS (risk coefficients) for PF normalization support ▲recognizing RP sales for liquidity management before and after PF loans ▲relaxing business feasibility evaluation criteria when supplying new funds.
The Financial Services Commission stated, "This measure is expected to contribute to the soft landing of real estate PF by supporting active financial fund supply to the PF market by financial companies and smooth restructuring and liquidation of sites. Going forward, the FSC plans to complete the remaining measures related to the already announced temporary financial regulatory easing by the end of June."
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