[Announcement] 50 Trillion Won+α Financial Sector Crisis Response Program Established

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki is announcing the main points at a joint briefing of related ministries following the 1st Emergency Economic Meeting held on the 19th at the Government Seoul Office in Gwanghwamun, Seoul.

[Asia Economy Reporter Kwangho Lee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, announced on the 19th, "We intend to establish a nationwide financial sector crisis response program totaling 50 trillion won plus alpha."

The following is the full statement.

Dear fellow citizens,

To overcome and resolve the unprecedented emergency economic situation as soon as possible,

the first emergency economic meeting chaired by the President, newly convened,

has just concluded.

Going forward, the Emergency Economic Meeting will serve as the highest decision-making body responding to the crisis.

It will focus on immediate market response and rapid resolution of difficulties,

timely decision-making and creative problem-solving,

and field-centered operations with communication with the public.

Together with the Central Disaster and Safety Countermeasure Headquarters responsible for quarantine,

the Economic Central Disaster and Safety Countermeasure Headquarters will play a role

in overcoming the emergency situation and economic crisis.

Dear citizens,

Today, through the first Emergency Economic Meeting, we have prepared a joint inter-agency

"Livelihood and Economic Financial Stability Package Program" that I would like to explain.

The COVID-19 situation has now become a global pandemic.

With movement restrictions, the world economy has come to a halt,

and global financial markets are shaking.

Past crises started in specific sectors such as finance

and then spread to other sectors and countries.

However, this crisis triggered by an infectious disease is different.

While the IMF foreign exchange crisis mainly affected the Asian region,

and the global financial crisis primarily impacted the financial sector,

this situation affects all sectors worldwide comprehensively,

virtually freezing human movement,

showing a total and complex crisis pattern.

Life and health are threatened,

the real economy is freezing globally,

and domestic and international financial markets are simultaneously

experiencing shocks.

We need to act proactively and more aggressively.

The government is moving urgently with heightened vigilance,

swiftly and continuously preparing necessary measures.

We have implemented emergency support packages totaling 20 trillion won in two phases by industry and sector,

and the third policy package, a supplementary budget of 11.7 trillion won,

passed the National Assembly two days ago on Tuesday.

Today, following these first, second, and third policy packages, we have prepared a nationwide financial sector crisis response program totaling 50 trillion won plus alpha for livelihood and financial stability.

Just as the COVID-19 virus is more fatal to people with weak immunity,

economic difficulties hit harder those who have difficulty securing funds and are smaller in scale,

such as small and medium-sized enterprises (SMEs), small merchants, and self-employed individuals.

Until the infectious disease situation ends and the economy normalizes,

there needs to be a safety net that vulnerable economic actors can rely on for the time being.

With this understanding, the current "Livelihood and Financial Stability Package Program"

was prepared focusing on three key points.

First, it is an unprecedented nationwide financial sector crisis response program.

Not only fiscal and financial authorities but also monetary authorities, policy financial institutions, and the financial sector have united to create this program.

Second, to ensure no shortage in response, it consists of nine detailed package programs totaling 50 trillion won plus alpha,

and the scale will be further expanded depending on future developments.

Third, support for SMEs, small merchants, and self-employed individuals,

and alleviation of financial burdens for vulnerable groups are prioritized,

along with measures to stabilize the overall financial market.

Among the nine programs, five* will be announced today with detailed contents,

and the remaining programs will be announced later through the Emergency Economic Meeting.

* ① Liquidity support for small merchants, ② Special guarantees for SMEs and small merchants, ③ Full guarantees for micro small merchants, ④ Principal maturity extension, ⑤ Interest repayment deferral

Now, I will explain the core contents of the "Livelihood and Financial Stability Package Program."

The program is prepared in three main directions:

① Strengthening financial support for SMEs, small merchants, and self-employed individuals,

② Alleviating financial burdens for vulnerable groups,

③ Stabilizing financial markets such as stocks and bonds.

[Support for SMEs, Small Merchants, and Self-Employed]

First, support for SMEs, small merchants, and self-employed individuals who are increasingly affected by COVID-19.

We will significantly expand the support scale to respond to urgent funding needs through two tracks: loans and guarantees, and provide support swiftly.

First, we will expand loan volumes

and strengthen the support system to minimize blind spots.

Focusing on funds from the Small Enterprise and Market Service,

we will supply 12 trillion won in ultra-low interest loans at about 1.5% interest rate to meet the surging demand for low-interest loans.

To this end, the public and private sectors will organically share roles

to build a three-layered, dense support network.

The first support network is directly handled by the government.

The Small Enterprise and Market Service will supply 2.7 trillion won in management stabilization funds

mainly to those with low credit ratings who find general loans difficult.

In particular, to ensure practical benefits reach low-credit small merchants,

funds previously supplied to high-credit borrowers will be shifted to focus on low-credit borrowers.

The second support network is handled by the policy financial institution, Industrial Bank of Korea.

It will focus more on those with medium credit levels,

providing 5.8 trillion won in ultra-low interest loans.

In addition to the above 8.5 trillion won, an additional 3.5 trillion won

will be supplied through the third support network, including commercial banks.

The government will compensate for the difference between market interest rates and loan interest rates so that commercial banks can offer loans at about 1.5%, similar to the other two support funds.

Next is the relaxation of the scope and conditions for guarantees supporting loans.

To ensure loans to SMEs and small merchants temporarily experiencing sales declines are provided quickly and smoothly,

we will introduce a special guarantee program totaling 5.5 trillion won,

guaranteeing 95% to 100% of bank loan amounts,

and reduce guarantee fees to below 1%.

Separately,

we will also introduce a full guarantee program totaling 3 trillion won.

For micro small merchants directly or indirectly affected by COVID-19 who urgently need small funds,

we will guarantee 100% of bank loan amounts to enable maximum and rapid loan access,

and ease guarantee screening requirements and fee burdens.

[Alleviation of Financial Burdens for Vulnerable Groups]

Second, I will explain measures to alleviate financial burdens for vulnerable groups.

For vulnerable groups facing immediate cash shortages due to sales declines,

loan maturity extensions and interest repayment deferrals, which are most urgently needed,

will be expanded to all financial sectors,

and credit recovery support for overdue loans will be strengthened.

Regarding loan maturity extensions,

currently implemented by banks and some insurance, card companies, and savings banks,

extensions will be expanded to loans in the relatively less favorable secondary financial sector.

The entire financial sector, including credit cooperatives, Nonghyup, Suhyup, and Saemaeul Geumgo, will participate in unison,

extending loan maturities by at least six months for SMEs and small merchants directly or indirectly affected by COVID-19.

For SMEs and small merchants experiencing sales declines due to COVID-19,

interest on loans is also a significant burden.

To help them get through difficult times without worrying about interest,

all financial sectors will participate in deferring interest repayments for six months on due interest.

These maturity extension and interest repayment deferral measures

will be implemented from April 1st for SMEs and small merchants directly or indirectly affected by COVID-19,

who have no defaults such as principal and interest arrears or capital erosion.

However, household loans, real estate sales and rental businesses,

and loans related to entertainment and nightlife businesses are excluded.

Credit recovery and debt adjustment support for overdue loans will also be strengthened to help affected small merchants and others overcome immediate difficulties and stand back up.

The Credit Recovery Committee will add COVID-19 victims to its recovery support targets,

supporting principal repayment deferrals and debt reductions for overdue loans.

The Asset Management Company will purchase up to 2 trillion won in overdue claims from small merchants and individual debtors affected by COVID-19,

and support repayment deferrals and long-term installment repayments.

[Financial Market Stability]

Third, we will make every effort to stabilize the bond and stock markets.

If financial markets freeze,

companies that need to raise funds by issuing corporate bonds and stocks

face a liquidity crunch.

In a situation where sales are declining due to COVID-19 damage,

excessive price fluctuations in the funding market

can also burden relatively healthy SMEs.

In difficult market conditions, someone needs to buy bonds and circulate money.

With this awareness, financial sectors including banks, securities, and insurance companies

will jointly establish a Bond Market Stabilization Fund.

Drawing on the experience and expertise from the bond market stabilization fund established during the 2008 crisis,

we will do our best to bring warmth back to the market.

The issuance of market stabilization bond collateralized securities (P-CBO) supporting companies with relatively low credit ratings

will be expanded to 6.7 trillion won over three years.

The Korea Development Bank will actively utilize the rapid underwriting system

to support urgent funding needs of companies by leading corporate bond underwriting.

Bonds underwritten will be supported to circulate normally in the market through guarantees from the Korea Credit Guarantee Fund.

We will also create a safety net for the stock market.

To prevent excessive stock market volatility from depressing the real economy and economic sentiment,

a Securities Market Stabilization Fund jointly funded by the financial sector will be established.

It will operate temporarily until the stock market recovers,

investing in market representative index products rather than individual stocks,

playing a role in stabilizing the overall stock market.

Details and scale of the Bond Market Stabilization Fund and Securities Market Stabilization Fund

will be announced later through the Emergency Economic Meeting.

[Closing Remarks]

Dear citizens,

Many crises our economy has faced came without prior warning, and the means to respond

have undergone numerous changes.

Looking back, the key to overcoming many crises was the unique cooperation, communication, and perseverance

of the government, institutions, private sector, and citizens working together with united strength and spirit.

I emphasize once again that this measure was prepared based on close cooperation not only among the government but also the Bank of Korea and financial institutions.

Since the current situation is an unprecedented new crisis,

the response measures must correspond accordingly,

a shared recognition and result of deep consideration.

The government will continue to be at the center of crisis response,

working closely with related agencies to do its utmost to overcome the economic difficulties.

I ask the citizens to trust the resilience of our economy, which has overcome numerous crises and developed,

and to send your faith and support.

Thank you.

Deputy Prime Minister and Minister of Economy and Finance

Hong Nam-ki

Minister of SMEs and Startups

Park Young-sun

Chairman of the Financial Services Commission

Eun Sung-soo

This content was produced with the assistance of AI translation services.