Issued Amount Records 10.7 Trillion
MBS Issuance Plummets Following Special Bogeumjari Loan Termination
First Ever ABS Issuance Backed by Rental Company Receivables
The Financial Supervisory Service announced on the 30th that the issuance amount of Asset-Backed Securities (ABS) in the third quarter was 10.7 trillion KRW, a decrease of 6.9 trillion KRW (39.3%) compared to the same period last year.
Asset-Backed Securities refer to securities issued using assets with low liquidity, such as real estate, accounts receivable, and mortgage loans, as collateral.
With the end of the special Bogeumjari Loan program, the issuance of Mortgage-Backed Securities (MBS) by the Korea Housing Finance Corporation, which uses mortgage loans as underlying assets, sharply declined by 67.6%, leading to a reduction in the overall ABS issuance volume.
The issuance amount of ABS issued by general corporations also decreased by 23.8% compared to the same period last year, totaling 1.113 trillion KRW.
On the other hand, the issuance volume of ABS by financial companies increased by 43.6% to 5.6171 trillion KRW. This was due to the expansion of ABS issuance based on installment finance receivables by specialized credit finance companies and non-performing loan (NPL) backed ABS issued by banks.
The Financial Supervisory Service explained, "Efforts to secure asset soundness through the sale of non-performing loans by banks and others led to a 71.6% increase in NPL-backed ABS issuance compared to the same period last year."
With the revision of the Enforcement Decree and supervisory regulations of the Specialized Credit Finance Business Act, the funding methods for specialized credit finance companies have expanded, resulting in the first issuance of rental receivables-backed ABS by specialized credit finance companies, amounting to 40 billion KRW. Previously, only receivables related to the core business of specialized credit finance companies (such as installment and lease) could be securitized, but under the revised regulations, receivables related to ancillary businesses (rental business) are also allowed to be securitized.
Meanwhile, the total outstanding balance of registered ABS as of the end of September was 258.8 trillion KRW, an increase of 12.8 trillion KRW (5.2%) compared to the end of the same period last year (246 trillion KRW).
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