Lee Bok-hyun "Need Model Cases for Cleaning Up Financial Sector PF Failures... On-site Inspection of PF Interest Rates and Fees"

Holding a Meeting Between Financial and Construction Sectors to Discuss Support Measures
"Increase in PF Sites with Deteriorated Profitability Due to Rising Interest Rates and Construction Costs"
Revising 'Profitability Evaluation Criteria and Lenders' Agreement' to Promote Cleanup of Non-performing Sites

Lee Bok-hyun, Governor of the Financial Supervisory Service, is announcing the dispute mediation guidelines related to large-scale losses of Hong Kong H-index linked ELS at the Financial Supervisory Service in Yeouido, Seoul on the 11th. Photo by Kang Jin-hyung aymsdream@

"To promote the resolution of distressed real estate project financing (PF) sites, we are pushing forward with the revision of project feasibility evaluation standards and creditor consortium agreements. The financial sector needs to continuously create best practices."

Financial Supervisory Service (FSS) Governor Lee Bok-hyun stated this during his opening remarks at the 'Financial Sector and Construction Industry Meeting to Promote Normalization of Real Estate PF' held at the Housing Construction Hall in Yeouido, Seoul. This meeting was organized to discuss support measures such as funding supply for PF sites with normalization potential and to listen to the vivid difficulties and suggestions from construction sites.

Attendees at the meeting included construction industry figures such as Han Seung-gu, Chairman of the Korea Construction Association, Jeong Won-ju, Chairman of the Korea Housing Construction Association, and Kim Tae-jin, President of GS Construction, as well as financial sector leaders including Lim Jong-ryong, Chairman of Woori Financial Group, Ham Young-joo, Chairman of Hana Financial Group, Lee Seok-jun, Chairman of NongHyup Financial Group, Kim Yong-beom, Vice Chairman of Meritz Financial Group, Kim Sung-tae, President of IBK Industrial Bank of Korea, and Oh Hwa-kyung, Chairman of the Korea Federation of Savings Banks.

Governor Lee said, "Currently, the PF delinquency rate in the financial sector is in the high 2% range, which is manageable from a financial system perspective, but PF sites with significantly deteriorated feasibility due to high interest rates and rising construction costs are gradually increasing," adding, "Financial funds being tied up in distressed sites for a long time are becoming a heavy burden for both construction companies and financial institutions."

In response, financial authorities are encouraging the resolution and restructuring of real estate PF sites, which have raised concerns following the workout (corporate financial restructuring) of Taeyoung Construction. In particular, they are promoting the revision of 'project feasibility evaluation standards' and 'creditor consortium agreements' to more precisely assess the feasibility of PF sites and facilitate the resolution of distressed sites.

He stated, "We will also identify and improve unreasonable systems and practices," and added, "Through on-site inspections, we will check whether PF interest rates and fees are being reasonably imposed in line with loan risks from the perspective of fairness and common sense, and strive to reduce the financial burden on the construction industry."

He emphasized, "The financial sector should continue to create best practices centered on financial holding company affiliates to activate resolution and restructuring, and it is also necessary to consider expanding the scale of the financial sector normalization support fund." The financial authorities plan to additionally raise 20 billion KRW for the credit finance sector fund and 7.57 billion KRW for the savings bank sector fund in April.

Given the complex interests involved in real estate PF, he reiterated the need for the financial sector and construction industry to work together to share losses. Governor Lee said, "Considering the complex interests surrounding PF, successful restructuring will require the financial sector and construction industry to make concessions step by step through loss sharing," and added, "If the previously stalled PF projects resume, it will also benefit the construction industry and subcontractors."

Meanwhile, construction industry participants agreed on the need to sort and improve project feasibility through resolution and restructuring by project site, and expressed the opinion that PF funding from the financial sector should be expanded for projects judged to be normalizable. They also requested improvements regarding cases where PF interest rates and fees are excessively high even for projects undergoing normalization efforts.

Financial sector attendees, including financial holding companies, also pledged to actively discover and promote various restructuring cases such as auctions and sales, and to make efforts to normalize real estate PF through financial supply to normal PF projects.

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