[2020 National Audit] 1.29 Million Bonds of Financial Public Enterprises with 'Principal < Interest'

Assemblyman Min Hyung-bae "Interest Rates on Overdue Payments Should Be Lowered and Long-term Bonds Actively Managed"

[Asia Economy Reporter Park Sun-mi] Ahead of the national audit (Gukgam) targeting financial public enterprises on the 20th, opinions have emerged that the cleanup of 1.29 million bonds with interest exceeding the principal must begin.

According to data received by Min Hyung-bae, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, from four financial public enterprises under the Financial Services Commission?Korea Asset Management Corporation (KAMCO), Korea Housing Finance Corporation (KHFC), Korea Credit Guarantee Fund (KODIT), and Korea Deposit Insurance Corporation (KDIC)?as of the end of August this year, the number of bonds held by the four major financial public enterprises with interest exceeding the principal reached 1,290,646.

The total principal amounts to 53.0092 trillion KRW, and the interest is 149.2552 trillion KRW, making the interest-to-principal ratio 281%. The interest on bonds held by KR&C, a subsidiary of KDIC, was 43.6835 trillion KRW, which is 369% of the principal (16.3832 trillion KRW). The interest-to-principal ratios were high in the following order: KAMCO (281%), KDIC’s bankruptcy estate (266%), KODIT (232%), KHFC (210%), and KAMCO’s National Happiness Fund bonds (206%).

Although these are difficult-to-repay loans where interest exceeds the principal, from 2017 to August this year, in the recent 3 years and 8 months, 110,762 cases were fully repaid. The repaid bonds had interest amounting to 249% of the principal.

Representative Min argues that if high-interest overdue interest continues to be charged to low-income citizens, the interest will exceed the principal, making repayment impossible. He insists that financial public enterprises should step in to lower overdue interest rates and at least waive the portion where interest exceeds 100% of the principal.

Min said, "These public enterprises only write off a small number of bonds that appear impossible to repay, while extending the statute of limitations through lawsuits and debt approvals for the rest," adding, "Charging citizens debts where interest exceeds the principal is completely inconsistent with inclusive financial policies, so financial public enterprises must actively clean up high-interest bonds."

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