Korea Housing Finance Corporation Provides Payment Guarantee for BNK Kyongnam Bank Covered Bond
Providing Stable Housing Finance Support
for Ordinary Citizens and Genuine Homebuyers in Regional Communities
The Korea Housing Finance Corporation (President Kim Kyunghwan) has provided a payment guarantee for a covered bond issued by BNK Kyongnam Bank, marking the first issuance of a "payment-guaranteed covered bond" by a regional bank.
On November 3, the Korea Housing Finance Corporation announced that it had provided a payment guarantee for a 5-year covered bond worth 150 billion won (with an interest rate of 3.04%) issued by BNK Kyongnam Bank on October 31. With this issuance, BNK Kyongnam Bank was able to raise its credit rating from AA+ to AAA through the corporation's guarantee, thereby reducing the cost of securing funds for mortgage loans.
According to the corporation, BNK Kyongnam Bank succeeded in raising funds efficiently by issuing the bond at an interest rate approximately 0.10 percentage points lower than that of AA+ rated bank bonds with the same maturity (3.146%), thanks to the guarantee.
Covered bonds are issued under the Act on Issuance of Bonds with Dual Recourse, granting investors preferential repayment rights not only from the issuing institution but also from the collateralized assets. When a payment guarantee is attached, the Korea Housing Finance Corporation will repay the principal and interest on behalf of the issuer if it fails to do so, further enhancing investment stability.
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Kim Kyunghwan, President of the Korea Housing Finance Corporation, stated, "The issuance of a payment-guaranteed covered bond by BNK Kyongnam Bank is the first case among regional banks and aligns with the government's policy of supporting regional finance. We will expand support through the covered bond payment guarantee program to provide stable housing finance to ordinary citizens and genuine homebuyers."
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