Financial Services Commission Chairman: "Active Support for Shipbuilder Refund Guarantee (RG) Issuance"
Proactive Promotion of Exemptions for Financial Institutions Related to RG Issuance
On-site Meeting with Medium-Sized Shipbuilders Held in Mokpo
Kim Byung-hwan, Chairman of the Financial Services Commission (center), visited Mokpo and Haenam on the 24th along with the President of the Korea Development Bank, the Vice President of the Export-Import Bank, and the Vice President of Gwangju Bank to hold a meeting with shipbuilders in the Jeonnam region. They listened to issues related to shipbuilders' order trends and the issuance of Refund Guarantee (RG) certificates. Afterwards, they visited the Haenam plant of Daehan Shipbuilding, where ship construction is underway, and received a briefing on Daehan Shipbuilding's main vessel types (oil and petroleum product carriers). Photo by Financial Services Commission.
The government will grant exemptions related to the issuance of Refund Guarantees (RG) by financial institutions to strengthen the order competitiveness of medium-sized shipbuilders.
On the 24th, the Financial Services Commission announced that it will promote exemptions for financial companies and diversify issuing institutions to activate RG issuance for medium-sized shipbuilders. To this end, it will establish order guidelines for medium-sized shipbuilders and promote exemptions for RG issuance that has undergone business feasibility reviews by external organizations. The intention is to encourage financial companies, which have been conservative in issuing RGs for medium-sized companies, to participate more actively in RG issuance.
An RG refers to a guarantee received from a financial institution when a shipowner orders a ship and pays an advance to the shipbuilder. It is a guarantee that the financial institution will pay the advance received by the shipbuilder in case the shipbuilder goes bankrupt. Despite improvements in the shipbuilding industry, smaller shipbuilders have often faced difficulties in securing orders due to the inability to obtain RGs.
On the same day, Kim Byung-hwan, chairman of the Financial Services Commission, held an on-site meeting with local medium-sized shipbuilders in Mokpo, Jeollanam-do, stating, "The shipbuilding industry accounts for a significant portion of our country's economy and exports and greatly contributes to the local economy and job creation," adding, "The government and financial companies are working to support the timely issuance of shipbuilder RGs to facilitate smooth order acquisition and to restore our shipbuilding ecosystem."
Chairman Kim explained, "Medium-sized shipbuilders are seeing increased overseas orders and improved business performance due to favorable global shipbuilding conditions," but added, "Financial companies conduct RG assessments based on losses experienced during past shipbuilding industry restructuring and current financial performance, which results in insufficient issuance of RGs necessary for orders."
He continued, "We will promote the granting of exemption privileges so that the business feasibility and future value of ordered ships can be actively reflected in RG assessments," and said, "Considering the improvement in shipbuilders' business performance, we will encourage a wider range of financial institutions, including the Export-Import Bank and private financial companies, to participate in RG issuance."
Financial companies attending the meeting also pledged financial support for medium-sized shipyards. Kang Seok-hoon, president of the Korea Development Bank, stated, "The Korea Development Bank will continue to actively support government policies and help the Korean shipbuilding industry grow further." Lee Won-gyun, vice president of the Export-Import Bank, emphasized, "Once the 2024 financial statements are completed, we plan to conduct credit evaluations and actively consider issuing new RGs to medium-sized shipbuilders with construction capacity and export fulfillment ability based on the order guidelines."
Park Sung-woo, vice president of Gwangju Bank, said, "As a bank representing the Jeonnam region, we will actively resolve the difficulties of shipbuilders to revitalize the local economy." Kim Wan-taek, head of Shinhan Bank's Honam Western Headquarters, remarked, "We are pleased that Shinhan Bank was the first among commercial banks to issue an RG in 11 years, and we will continue to maintain interest in RG issuance going forward."
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