Lee Bok-hyun: "Urgent Resolution Needed for Poor PF Projects... Strict Accountability for Avoidance"

Financial authorities are set to intensify the cleanup of distressed real estate project financing (PF) sites. On the 23rd, Lee Bok-hyun, Governor of the Financial Supervisory Service, demanded that financial companies swiftly sell and clear distressed sites where conversion to main PF has not been made for a long time, while also requiring them to recognize 100% of the expected losses and build up provisions.

On the 9th, Lee Bok-hyun, Governor of the Financial Supervisory Service, after concluding a New Year's financial issues meeting with the chairmen of seven financial holding companies, the chairman of the Korea Development Bank, and the president of the Industrial Bank of Korea at the Bankers' Hall, is speaking to reporters about the meeting results. Photo by Heo Young-han younghan@

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Governor Lee held an executive meeting that morning and stated, “The need to resolve distressed real estate PF has increased, but the cleanup of distressed sites is progressing slowly, with even sites where normal project progress is difficult having their maturities extended.”

He pointed out, “If the cleanup of distressed PF sites is not carried out, it will hinder the productive allocation of funds in the financial sector and also limit the virtuous cycle of the real economy. Therefore, it is necessary to remove PF distress more swiftly.”

In this regard, Governor Lee presented key principles related to the cleanup of distressed PF sites. He said, “For PF sites without business viability, such as bridge loans where conversion to main PF has not occurred for a long time, financial companies should, in principle, recognize 100% of the expected losses and build provisions by the 2023 year-end settlement, and promptly sell and clear these sites.”

Additionally, Governor Lee stated, “For PF sites where construction delays persist or the sales rate is significantly low, provisions should be gradually strengthened considering the experience loss rates from the worst past situations. In the process of loss compensation such as auctions and public sales, collateral value must be strictly assessed, considering the possibility of additional price adjustments.”

Governor Lee also emphasized, “Once the 2023 year-end settlement is completed, we plan to closely inspect the status of provision accumulation by financial companies. Financial companies need to build provisions to the maximum extent possible within their capacity. We will hold financial companies strictly accountable if they avoid recognizing PF losses by focusing on short-term performance and use the remaining resources for dividends or bonuses.”

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