Ministry of the Interior and Safety Strengthens Saemaeul Geumgo Real Estate Loan Handling Standards

The management-type land trust loans (Gwan-to loans) and real estate joint loan handling standards of Saemaeul Geumgo will be strengthened.

On the 5th, the Ministry of the Interior and Safety announced that it held the 'Management Innovation Implementation Promotion Council,' a working group to inspect and support the implementation of Saemaeul Geumgo's management innovation plan, and discussed measures to strengthen Saemaeul Geumgo's credit management.

MG Saemaeul Geumgo branch in a market in Seoul. Photo by Heo Younghan younghan@

First, to enhance credit soundness management, the Ministry of the Interior and Safety decided to strengthen the handling standards for all Gwan-to loans and real estate joint loans. To this end, the internal regulations will institutionalize that the central association must participate through joint investment in Gwan-to loans implemented by frontline Geumgo and joint loans of 20 billion KRW or more, and that these loans can only be handled after undergoing screening.

Even if the loan amount is 20 billion KRW or less, joint loans of 7 billion KRW or more must proceed after prior review by the central association. To prevent frontline Geumgo from circumventing strengthened regulations through 'split loans,' a computerized filtering system will be established to enable continuous monitoring.

In addition, negative evaluation criteria for each stage of real estate development project failures, such as construction delays, work stoppages, completion delays, and low sales rates, will be made more realistic, and individual Geumgo will be guided to reflect these in their loan loss provisions. This is intended to strengthen the business feasibility evaluation of Gwan-to loans and real estate joint loans.

Saemaeul Geumgo's alternative investment management and screening will also be strengthened. To prevent the previously pointed out problem of 'self-screening' in alternative investments, new investments will be directly reviewed by the risk management department independent from the management department.

The Alternative Investment Screening Committee, which previously reviewed only investments exceeding 70 billion KRW, will expand its review scope to include investments exceeding 30 billion KRW. The related committee will also be composed so that external expert members and internal members affiliated with the CEO of the Credit Guarantee Corporation constitute the majority, thereby strengthening external control.

Choi Byung-kwan, Director of the Local Finance and Economy Office at the Ministry of the Interior and Safety, stated, "We will continue to strengthen Saemaeul Geumgo's credit management standards in line with the financial authorities' policy to enhance soundness, and will inspect and manage alternative investments to ensure they are operated at an appropriate level."

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