'Corona Loan' Maturity Extension and Interest Deferral Likely to be Extended Until September

Financial Services Commission to Announce Plan at the End of This Month After Consultation with Financial Sector

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[Asia Economy Reporter Ki Ha-young] Due to the prolonged COVID-19 pandemic, the extension of loan maturities and interest repayment deferral measures for small and medium-sized enterprises (SMEs) and small business owners are expected to be extended for another six months.

According to the financial sector on the 14th, financial authorities are in discussions with the financial sector regarding the extension of loan maturities. As the Financial Services Commission introduced its business plan for this year and stated that it is inevitable to extend once more the loan maturity extension and interest repayment deferral measures, which were extended until March 31, there is a general consensus inside and outside the financial sector that the re-extension is a foregone conclusion.

The number of cases with interest repayment deferral is 13,000 (loan amounting to 4.7 trillion KRW), with an amount of approximately 157 billion KRW. The re-extension period is expected to be six months (until September 31).

The Financial Services Commission also plans to prepare a soft landing plan to prevent the borrower's repayment burden from concentrating all at once when normalizing the deferral measures as the COVID-19 situation ends. Even after the repayment deferral ends, the policy is to encourage various long-term and installment repayment options so that individual borrowers can choose repayment methods according to their circumstances. Extensions of the repayment period for deferred principal and interest and conversion to long-term loans are being discussed. The Financial Services Commission plans to gather opinions from the financial sector and announce a soft landing plan for maturity extension and repayment deferral measures across the financial sector by the end of this month.

Financial regulatory relaxation measures introduced during the COVID-19 response are also expected to be extended once more. A representative example is the liquidity coverage ratio (LCR) for banks, which was temporarily eased until the end of March. The LCR is the ratio of high-quality liquid assets to the expected net cash outflows over the next 30 days. Financial authorities lowered the foreign currency LCR from 80% or higher to 70% or higher, and the combined LCR of KRW and foreign currency from 100% or higher to 85% or higher, to enable banks to lend to SMEs and small business owners facing funding difficulties due to COVID-19.

However, when extending the financial regulatory relaxation measures, financial authorities are considering selectively applying them to financial companies. The rationale is that financial companies with a high proportion of loans not related to COVID-19 response should be treated differently.

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