[2024 National Audit] Lee Bok-hyun "If the PF 4-step Evaluation Criteria Had Not Been Implemented, Normalization Would Not Have Occurred"

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), emphasized that the expansion of the real estate project financing (PF) business viability evaluation grades from three to four levels is an effective method for cleaning up non-performing projects. He also stated that the non-action opinion letter related to real estate PF issued in May was an essential measure for the smooth landing of real estate PF.

On the 17th, during the National Assembly's Political Affairs Committee audit, in response to a question from Assemblyman Han Chang-min of the Social Democratic Party asking whether the expansion of real estate PF evaluation grades might cause adverse effects by prolonging non-performing loans, Governor Lee replied, "I understood it completely the opposite. Since the evaluation was only in three stages, there was an ambiguous aspect of deferring non-performing loans, so we divided the evaluation into multiple stages and made the evaluation criteria more stringent."

He added, "In the past system, it was difficult to weed out non-performing loans, so despite strong opposition from the industry, we expanded the evaluation grades under the principle that real estate PF must be normalized," and stated, "You can see from the numbers that without this (expansion of evaluation grades), normalization would not have happened at all."

During the audit, there was also mention that the non-action opinion letter issued by the FSS in May could be seen as a special favor to some sectors. The non-action opinion letter refers to a document confirming that financial companies will not face sanctions or other measures in the future when they clean up or restructure PF projects lacking viability or supply new funds to projects with normalization potential.

In response, Governor Lee explained, "Someone has to absorb the projects being flooded through auctions and compulsory sales at prices 50-70% lower than book value, so when the financial sector creates trillion-won syndicated loans and plays the role of accepting them in the market, they will not be held responsible when injecting new funds."

He also stated, "The real estate PF exposure is about 220 trillion to 230 trillion won," adding, "This figure includes Saemaeul Geumgo loans and land-secured loans that were missing from past statistics."

Lee Bok-hyun, Governor of the Financial Supervisory Service, is responding to a lawmaker's question during the National Assembly's Political Affairs Committee's audit of the Financial Supervisory Service held on the 17th. Photo by Kim Hyun-min