Operation of 'Corporate Restructuring Agreement for Bond Financial Institutions' as the Expiration of the Special Act on Corporate Restructuring Approaches (Gichokbeop) Approaches

With the expiration of the Act on the Promotion of Corporate Restructuring (the Act), a gap has emerged in the domestic corporate restructuring system, and the "Operational Agreement on Corporate Restructuring Work of Creditor Financial Institutions" is set to be fully launched to minimize this gap.

According to the financial sector on the 31st, the Korea Federation of Banks, Korea Financial Investment Association, Korea Life Insurance Association, Korea Non-Life Insurance Association, Korea Credit Finance Association, Korea Federation of Savings Banks, and the Financial Creditors Adjustment Committee will begin operating the agreement from today.

[Image source=Yonhap News]

The six financial associations and the Financial Creditors Adjustment Committee previously operated a "Task Force (TF) for Agreement Establishment" to prepare an agreement based on the restructuring system under the Act, and have been conducting the subscription process for affiliated financial institutions since the 17th. The total subscription rate has reached 98.0%.

Each association plans to allow financial institutions that have not yet joined the operational agreement, as well as non-financial creditors, to participate at any time after the implementation of the agreement without restrictions on additional subscriptions.

Meanwhile, as the concerns raised by the expiration of the Act have become a reality, the financial sector sees the active utilization of this operational agreement as necessary. With increasing signs of risk such as a rise in the number of marginal companies, delinquency rates, and corporate rehabilitation and bankruptcy filings?which in the third quarter have already surpassed the total number of applications from last year?there is growing concern over large-scale insolvency. Therefore, urgent support for rapid corporate normalization centered on financial creditors through the operational agreement is essential.

However, unlike the Act, which applies to all financial creditors, the operational agreement only applies to subscribing institutions, presenting limitations. Thus, the financial sector believes that re-legislation of the Act is necessary. A financial sector official stated, "We plan to actively cooperate with relevant government departments to ensure that the Act is re-legislated as soon as possible so that smoother corporate restructuring can proceed."

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