Debt Relief for New Bonds and Other Financial Public Institutions Becomes Easier

Financial Services Commission and 5 Guarantee Agencies Sign MOU to Strengthen Support for Credit Recovery on Guaranteed Loans
Significant Expansion of Unamortized Debt Reduction Rates and Principal Reduction Criteria

[Asia Economy Reporter Jin-ho Kim] The debt adjustment criteria for guaranteed loans managed by financial public institutions such as the Korea Credit Guarantee Fund and the Korea Housing Finance Corporation will be improved. The main focus is on improving the reduction rates and principal reduction criteria for unamortized claims. Financial authorities expect that this improvement will reduce the burden on small business owners and low-income earners by approximately 2.9 trillion won.

On the 29th, the Financial Services Commission held a business agreement ceremony titled "Strengthening Credit Recovery Support for Guaranteed Loans to Support the Rehabilitation of Small Business Owners and Low-Income Earners" and announced these improvements. The ceremony was attended by Financial Services Commission Chairman Seung-beom Ko, as well as representatives from five guarantee institutions including the Korea Credit Guarantee Fund, Korea Housing Finance Corporation, Agricultural, Forestry and Fisheries Credit Guarantee Fund, Seoul Guarantee Insurance, and the Credit Recovery Committee.

Through this agreement, the five guarantee institutions decided to significantly improve the debt adjustment criteria for guaranteed loans to small business owners and low-income earners.

First, the reduction rate for unamortized claims will be improved. Currently, according to agreements between the Korea Credit Guarantee Fund, financial companies, and guarantee institutions, amortized claims receive a principal reduction of 20-70%, while unamortized claims receive 0-30%. However, starting next year, for unamortized claims that have passed more than one year since subrogation payment, the reduction rate will be expanded to the level of amortized claims (0-70%) regardless of amortization status. The Financial Services Commission expects that approximately 2.1 trillion won (300,000 cases) of non-performing loans will benefit from the improved reduction rates.

The principal reduction (0-30%) that was previously applied only after 12 months from the subrogation payment date will also be expanded to claims that have passed more than 6 months. Through this, about 800 billion won (72,000 cases) of non-performing loans will be subject to the reduction criteria.

Chairman Ko said, "Individual debtors such as self-employed people who received guaranteed loan support due to COVID-19 damage should not face difficulties in returning to normal economic life after long-term delinquency."

Meanwhile, at the agreement ceremony, financial support measures for low-income and vulnerable groups were also discussed. The Financial Services Commission announced that next year's policy for low-income finance will be expanded to 10 trillion won and that demand-tailored supply will be promoted. Additionally, considering low-income and real demanders, flexible household debt management and a super-low interest loan program with interest rates in the 1% range for small business owners and others will be operated.

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