[2022 National Audit] Jungjin Gong Accident Bond Recovery Rate Halved

Over the Past Decade, Execution Scale Doubled While Non-Performing Loans Increased 3.3 Times
Recovery Rate of Defaulted Loans Dropped from 29.2% in 2014 to 12.6% in 2021

[Asia Economy Reporter Kim Cheol-hyun] It has been revealed that the recovery rate of defaulted loans managed by the Small and Medium Business Corporation (hereinafter referred to as SBC) has decreased by nearly half. While managing non-performing loans is crucial for the soundness of the fund, there are concerns that there are gaps in this area.

Lee Jang-seop, a member of the National Assembly’s Industry, Trade, Energy, and Small and Medium Enterprises Committee from the Democratic Party of Korea, stated during the National Assembly audit on the 13th that over the past 10 years, the scale of policy fund disbursement by SBC doubled from 31.493 trillion won in 2012 to 60.1 trillion won in 2021. However, the amount of non-performing loans, calculated by subtracting recovered amounts from contract cancellations, increased 3.3 times from 159.2 billion won to 522.2 billion won during the same period.

Lee pointed out that the main reason for the sharp increase in non-performing loans relative to the disbursement scale is the rapid decline in the recovery rate of defaulted loans. The recovery rate of defaulted loans, which was 23.52% in 2012, rose to 29.2% in 2014 but then dropped to 12.55% last year.

SBC directly compensates for such losses through government contributions, but due to the increase in non-performing loans, the amount of loss compensation also more than doubled from 195.9 billion won in 2017 to 418.9 billion won this year. Additionally, SBC sells some of these non-performing loans to the Korea Asset Management Corporation. In 2020 and 2021, bonds worth 200.3 billion won and 200.9 billion won were sold, respectively, but the selling prices were excessively low. This was because the bonds sold were judged to have no recovery value due to lack of collateral or long delinquency periods.

Lee stated, "To increase the recovery rate, the role in the early stages of non-performance is important. However, there have been cases of omitting investigations into delinquent companies’ actual conditions, losing collateral items, or unauthorized removal of collateral." He added, "It is necessary to enhance the soundness of fund management through comprehensive inspections from screening and non-performing loan management to the recovery stage."

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