Financial Services Commission: "Efforts Needed to Enhance Loss Absorption Capacity, Including Restrictions on Bank Dividends" (Comprehensive)

"Concerns Over Additional Extension of COVID Loan Maturities"

Son Byung-du, Vice Chairman of the Financial Services Commission / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Hyo-jin] Sohn Byung-doo, Vice Chairman of the Financial Services Commission, stated on the 30th regarding measures such as the temporary extension of loan maturities in the financial sector due to the novel coronavirus infection (COVID-19), "As the expiration of the operation period approaches, we will consider with financial companies whether to extend the deadline and normalization plans."

Vice Chairman Sohn made these remarks while presiding over the 'Financial Risk Response Team Meeting' at the Korea Federation of Banks in Jung-gu, Seoul, on the same day.

The financial authorities are implementing measures such as temporarily extending the loan maturities of small and medium-sized enterprises and small business owners at commercial banks until September and somewhat relaxing certain regulations on financial companies until the same period, considering the impact of COVID-19.

Vice Chairman Sohn also emphasized, "Securing funds through supplementary budgets is of utmost importance for the smooth implementation of the livelihood financial stability package program operated by the government," urging the National Assembly to promptly discuss the supplementary budget.

He mentioned that the International Monetary Fund (IMF) and the U.S. Federal Reserve (Fed) have stated the necessity of prohibiting share buybacks and restricting dividends by banks to strengthen capital in preparation for the prolonged COVID-19 situation.

He then urged, "The banking sector should refer to these discussions and strive to maintain the function of supplying funds to the real economy while expanding loss absorption capacity, such as by setting aside loan loss provisions, in preparation for the possibility of a prolonged COVID-19 crisis."

Regarding the June 17 real estate measures, Vice Chairman Sohn pointed out, "For the follow-up measures to be implemented smoothly, it is essential that the public be properly informed about regulatory changes at the frontline counters of financial companies, which are the contact points with the people," and requested, "I ask the management of financial companies to pay special attention to frontline employees’ understanding of regulations and smooth guidance."

The government has banned mortgage loans (jumdae) for all housing sales and rental businesses using corporations starting from the 1st of next month to block real estate speculation through corporations. Additionally, to receive mortgage loans in regulated areas, stricter requirements have been imposed, such as disposing of existing houses within six months and moving into new houses to meet actual demand conditions.

Meanwhile, the Financial Services Commission has identified that from February to the 26th of this month, it has provided financial support including loans and guarantees totaling 1,703,000 cases and 146.1 trillion won to small and medium-sized enterprises and small business owners related to COVID-19.

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