Considering Additional Extension of COVID-19 Financial Support Ending in September Amid 4th Wave

Financial Services Commission Likely to Discuss Further Extension at Weekly Work Meeting

[Asia Economy Reporter Kwangho Lee] Financial authorities are reconsidering the loan maturity extension and interest repayment deferral measures for small and medium-sized enterprises (SMEs) and small business owners, which were scheduled to end in September. This comes from the judgment that their hardships are bound to increase as social distancing in the metropolitan area has been raised to the highest level, Level 4, due to the fourth wave of COVID-19.

Based on the previous two extension schedules, the prevailing view is that the measures could be extended at least until the end of the year or March next year. However, as household debt has recently surged sharply, there are also voices calling for the termination of financial support and the preparation of additional support measures for stable management.

According to financial authorities on the 9th, the Financial Services Commission will discuss such measures at the weekly work meeting held that day.

A financial authority official said, "As social distancing has been raised, it seems that additional extensions will be reviewed," adding, "We are currently holding video conferences with the financial sector and continuously monitoring the situation accordingly."

Earlier, at the National Assembly's Finance and Economy Committee meeting held earlier this month, Chairman Eun responded to a question from Min Byung-duk of the Democratic Party regarding the re-extension of financial support, saying, "We expected social distancing to be eased by July, but recently the spread of COVID-19 has increased again," and added, "The biggest factor will be how the quarantine situation develops," indicating the possibility of extension depending on the situation.

The Financial Services Commission has been operating the loan maturity extension and interest repayment deferral program since March last year to overcome the COVID-19 crisis. The loan repayment extension measure was extended by six months in September last year as the spread of COVID-19 did not subside, and was further extended by another six months under the same conditions in March this year.

At the time of the re-extension, the maturity of loans amounting to 130.2 trillion won (435,000 cases) was postponed. The scale of repayment deferral provided by private financial companies such as banks was about 88.9 trillion won, accounting for 68% of the total. As of the end of June, the four major banks?KB Kookmin, Shinhan, Hana, and Woori?had deferred principal maturity and interest payment on loans totaling 83 trillion won.

Experts hold the view that the termination of the financial support program should be approached cautiously. This is because more time is needed for potential non-performing loans in banks and for SMEs and small business owners to recover to pre-COVID-19 levels.

Kim Young-do, Senior Research Fellow at the Korea Institute of Finance, said, "Since the temporary financial support measures currently being implemented by financial authorities still raise concerns, a phased withdrawal is necessary," and emphasized, "Appropriate policy responses by the financial authorities are important."

Kim So-young, Professor of Economics at Seoul National University, advised, "For small business owners and self-employed individuals, there should be a comprehensive package that considers financial and fiscal support on how to revive them after COVID-19."

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