'Restructuring Plan' for Poor PF Projects to be Finalized by End of August... Savings Banks' Collateral Loan Delinquency Rate Reaches 20%

Financial Authorities Hold 3rd Real Estate PF Soft Landing Review Meeting
1 Trillion Syndicated Loan Applications Received from 5 Major Banks
Bridge Loan Balances, Delinquency Rates, Land-Backed Loans, and Detailed Statistics to Be Regularly Disclosed
Q1 Financial Sector PF Bridge Loan Delinquency Rate Recorded at 10.14%

The financial authorities, currently restructuring the real estate project financing (PF) market, will finalize restructuring and liquidation plans for projects classified as Caution (C) or At Risk of Default (D) based on the feasibility evaluation results submitted by financial companies by the end of August. Additionally, considering that the real estate PF soft-landing measures have entered their main phase, detailed statistics related to real estate PF?including bridge loan and main PF balances and delinquency rates, as well as land-secured loan balances and delinquency rates?will be regularly disclosed.

On the 31st, the Financial Services Commission and the Financial Supervisory Service held the 3rd Real Estate PF Soft-Landing Monitoring Meeting to review progress, upcoming schedules, and discuss plans for disclosing detailed real estate PF statistics.

First, the financial authorities reviewed the progress of feasibility evaluations according to policy directions. By July 5, the Financial Supervisory Service received feasibility evaluation results from financial companies for primary evaluation targets?projects with three or more maturity extensions, delinquencies, or delinquency forbearance. To verify these evaluations, on-site inspections and management interviews were conducted with some financial companies. Based on the feasibility evaluation results submitted by financial companies, the authorities plan to finalize restructuring and liquidation plans for Caution (C) and At Risk of Default (D) projects by the end of August.

Regarding syndicated loans, it was announced that since their launch on June 1 with a scale of 1 trillion KRW, applications have been received from five banks (NH, Shinhan, Woori, Hana, KB). The financial authorities noted that inquiries have been received from various types of projects?including auctioned and public sale projects, voluntary sale projects, NPL investment institutions, and projects facing temporary liquidity difficulties?without concentration in any specific category, confirming diverse loan demand by type. Participating financial institutions are currently negotiating with project operators, considering project feasibility, for the syndicated loans received.

The discussion also covered plans to regularly disclose detailed statistics related to PF loans, including land-secured loans. Since the end of December 2022, the financial authorities have been quarterly disclosing PF loan balances and delinquency rates by financial sector. However, following the May announcement of the "Future Policy Directions for the Orderly Soft Landing of Real Estate PF," the need for market communication regarding land-secured loan status and delinquency rates has increased, highlighting the necessity for detailed PF statistics disclosure.

Accordingly, considering that measures for the soft landing of real estate PF?such as feasibility evaluations, amendments to creditor agreements, and syndicated loan formation?have entered their main phase, the financial authorities will regularly disclose detailed statistics related to real estate PF, including bridge loan and main PF balances and delinquency rates, as well as land-secured loan balances and delinquency rates. Statistics as of the end of June this year will be disclosed around late August using the same standards and scope.

The financial authorities revealed that as of the end of March, the delinquency rate for bridge loans in the financial sector was 10.14%, marking a double-digit figure. In particular, the delinquency rates for PF bridge loans in the securities sector, savings banks, and specialized credit finance companies reached approximately 20%, 14%, and 12%, respectively. The delinquency rate for land-secured loans at savings banks surged by more than 10 percentage points to 20.18% compared to the end of last year. The balance of land-secured loans stood at 27.9 trillion KRW, down 1.7 trillion KRW from the previous year-end. The land-secured loan balances were 12.1 trillion KRW at mutual finance institutions, 11.3 trillion KRW at savings banks, and 4.6 trillion KRW at specialized credit finance companies, in that order.

A financial authority official stated, "By disclosing detailed real estate PF statistics, this will serve as an opportunity to enhance market trust in PF risk management and supervision, including the real estate PF soft-landing measures. Going forward, it is necessary to continue transparent information disclosure within feasible limits in response to market demands."

He added, "Since uncertainties still persist in the real estate PF market, we will maintain vigilance and make our best efforts to ensure that the government's original plan for the real estate PF soft landing?including restructuring and liquidation of distressed PF projects and supplying new funds to projects with recovery potential?is carried out smoothly through active communication and coordination with the financial and construction industries."

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