Authorities Conclude Temporary Regulatory Easing Measures Related to Real Estate PF

The financial authorities have completed temporary financial regulatory easing measures to ensure a smooth landing of the real estate project financing (PF) market.

On the 30th, the Financial Services Commission and the Financial Supervisory Service announced that on the 28th, they issued non-action opinions on four tasks related to 'Future policy directions for the orderly landing of real estate PF' with temporary financial regulatory easing. Following the issuance of non-action opinions on six tasks last month on the 30th, the regulatory easing measures for the remaining tasks have also been finalized.

First, the authorities took measures allowing financial companies in banking, savings banks, mutual finance, specialized credit finance, and financial investment sectors to upgrade the asset soundness classification up to 'normal' for restructured projects that meet all special requirements for soundness classification when supplying new funds until the end of this year, distinguishing these from existing loans within the project.

The special requirements apply to projects subject to financial sector creditor group agreements, sector-specific voluntary agreements, or projects participating in Korea Asset Management Corporation (KAMCO) or financial sector normalization support funds, provided they hold priority repayment rights. However, if the project becomes impaired after new fund support, the non-action opinion will be excluded, and separate asset soundness classification must be discontinued.

Additionally, the authorities established grounds for re-evaluating the business feasibility of restructured projects. For projects restructured involving capital structure changes such as additional new fund supply, change of project purpose, replacement of construction companies, or equity conversion, business feasibility can be assessed considering these factors. Minor changes to the business plan do not qualify.

The financial authorities also decided to reduce the credit risk factor when calculating the solvency ratio (K-ICS) for PF loan exposures newly handled through syndicated loans by insurance companies until the end of this year, and to exclude these from the real estate concentration risk measurement.

Furthermore, a non-action opinion was issued recognizing that when insurance companies sell repurchase agreement bonds (RP) to raise funds necessary for syndicated loans until the end of the year, this meets the borrowing requirements for maintaining appropriate liquidity as stipulated in the Insurance Business Act.

The authorities stated, "Through temporary financial regulatory easing such as special soundness classification for new fund supply and relaxed business feasibility evaluation criteria for restructured projects, financial companies are expected to more proactively participate in supplying new funds and restructuring projects with normalization potential, thereby contributing to the orderly landing of PF projects." They added, "The financial authorities will closely communicate with the sectors to ensure the effectiveness of the real estate PF smooth landing measures, identify additional incentives needed on the ground, and promptly implement necessary regulatory easing measures."