Registered ABS Issuance Drops 23% in First Half of the Year

In the first half of this year, the issuance amount of registered Asset-Backed Securities (ABS) decreased by more than 20% compared to a year ago, mainly due to a reduction in the issuance of Mortgage-Backed Securities (MBS).

According to the Financial Supervisory Service on July 31, the issuance amount of registered ABS in the first half was 21 trillion won, down by 6.5 trillion won (23.6%) from the same period last year. Registered ABS, issued under the Asset-Backed Securitization Act, require the submission of a registration application and other documents to the Financial Services Commission and the Financial Supervisory Service.

This downward trend is attributed to the continued decline in the issuance of MBS, which are backed by mortgage loans, as a result of the reduction in policy mortgage loans. After the termination of the Special Bogeumjari Loan, a policy financial product of the Korea Housing Finance Corporation, in January last year, MBS issuance has continued to decrease.

Additionally, improved bond market conditions, such as a decline in the interest rates of bonds issued by non-bank financial companies, led to a sharp decrease in the issuance of ABS backed by credit card receivables and other assets by non-bank financial institutions. The issuance dropped significantly from 5.6 trillion won in the first half of last year to 2.6 trillion won in the first half of this year. In contrast, issuance of ABS backed by real estate project financing (PF) increased notably. The Financial Supervisory Service explained, "Issuance of ABS backed by real estate PF, such as public-supported private rental housing development and new apartment construction projects, surged by 392.5% year-on-year to 3.8 trillion won."

By type of securitized asset, the issuance of ABS backed by loan receivables amounted to 12.6961 trillion won, a decrease of 21.5% compared to the previous year. The issuance of ABS backed by sales receivables also fell by 40.2% to 5.0649 trillion won. While both loan receivable-backed and sales receivable-backed ABS issuance declined year-on-year, the issuance of Primary Collateralized Bond Obligations (P-CBO), backed by newly issued corporate bonds from small and medium-sized enterprises, saw a slight increase.

By asset holder, the decline in ABS issuance by the Korea Housing Finance Corporation and financial companies was particularly notable. For the Korea Housing Finance Corporation, the issuance stood at 5.3732 trillion won, a sharp drop of 52.9% from a year earlier due to the reduction in MBS issuance. Financial companies (9.2842 trillion won) also saw a 24.5% decrease, as the issuance of ABS backed by card receivables by credit card companies was halved. In contrast, general corporations increased their issuance of ABS backed by real estate PF, resulting in a 67.5% year-on-year increase to 6.3532 trillion won in total issuance.

Meanwhile, as of the end of June, the outstanding balance of all registered ABS stood at 243.1 trillion won, a decrease of 14.1 trillion won (5.5%) compared to the end of the same period last year (257.2 trillion won).