Finance Commissioner Eun Seong-soo met with the chairman of the five financial holdings at the Bank Federation Hall on the 16th to discuss measures to support Corona 19 financial support, such as extending the maturity of loans to small business owners and SMEs. From left: Nonghyup Finance Chairman Son Byung-hwan, Cho Yong-byeong, Shinhan Finance Chairman, Eun Chairman, Yoon Jong-kyu, KB Finance Chairman, Kim Jeong-tae, Hana Finance Chairman, and Son Tae-seung, Woori Finance Chairman. Provided by the Financial Services Commission
Seong-soo Eun, chairman of the finance committee and chairman of the 5th major financial holding company, decided to re-extend the loan maturity and interest deferral programs for small business owners and SMEs until September. The amount of funds that will be delayed further exceeds 130 trillion won. They also formed a consensus to help the’soft landing of Corona 19′ by allowing loans to be distributed over a long period of time even after the financial aid program is over.
“An additional extension of financial support is inevitable”
Chairman Eun said on the 16th that he met with the chairmen of major financial groups at the Myeongdong Bank Association in Seoul and decided to extend the delay of repayment of loans by small business owners and small and medium-sized enterprises, which will end next month. After the meeting, Chairman Eun met with reporters and said, “When I explained to the financial group chairmen that an additional extension of the financial support program was inevitable, I agreed to the extension for six months.” The meeting was attended by KB Financial Group Chairman Yoon Jong-gyu, Cho Yong-byeong, Shinhan Financial Group Chairman, Kim Jeong-tae, Hana Financial Group Chairman, Son Tae-seung, Woori Financial Group Chairman, and Nonghyup Financial Group Chairman Son Byung-hwan.
In order to overcome the Corona 19 crisis, the Financial Services Commission has operated a six-month support program that extends the maturity of loans from March of last year and allows the principal and interest to be paid off later. The measures to extend the loan repayment continued for another half a year under the same conditions in September of last year, while the spread of Corona 19 seldom declined. According to the Financial Services Commission, as of the 22nd of last month, the maturity of loans worth 130 trillion won (435,000) has been delayed. The amount of money deferred by private financial institutions such as banks was 88.900 trillion won, or 68% of the total.
Banks are concerned about potential insolvent
Financial companies are concerned about deteriorating asset quality while accepting the renewal of support programs. This is because it means that they had loaned close to 90 trillion won for a year and a half without knowing the possibility of recovering the principal. An official from the financial sector said, “Since it is said that they will spend more than 10 trillion won as the fourth disaster support fund, they cannot just ignore the request to delay the loan maturity.” It is the government’s explanation that it is concerned, so we have to worry about potential insolvency.” Banks requested that the interest repayment deferral measure be removed, but the Financial Services Commission refused.
Chairman Eun explained that he should be aware of the possibility of deteriorating asset quality. He said, “There are risks related to the extension of the loan maturity,” he said. “I usually worry about it, but the answer is fixed because I cannot neglect Corona 19.” He added that “the holding or financial company should make an effort to accumulate more provisions accordingly.” On that day, the Financial Supervisory Service also emphasized that in the 2021 work plan, it is planning to instruct the borrower (borrower) to prepare for the accumulation of credit risk and to strengthen capital expansion and provisioning for the smooth performance of the financial company’s funding function.
Regarding the fact that the dividend payout ratio of bank holdings was tied to less than 20% by June, Chairman Eun said, “Is it not the government, why are they interfering with dividends?” “Europe, the United Kingdom, and the United States are also discussing dividend control, and we used the stress test results as the basis for clarity.”
Prepared a plan for a soft landing of’Corona Finance’
Chairman Eun and the chairman of the 5th major financial holding company decided not to repay the loan immediately even if the support program ended in September and additional maturity extensions were not made. Chairman Eun said, “Regarding the necessity of a soft landing for’Corona Finance’, we talked with the intention that the’loan cliff’, where loans are cut off the next day after the 6-month extension, is unrealistic.” I will prepare a plan and announce it not too late on how to do it.”
It is known that banks have been thinking about how to gradually reduce the burden on small business owners and SMEs through amortization over the years. An official from the financial sector said, “Not only the Financial Services Commission, but also financial companies do not want the impact of the suspension of COVID-19 financial support to be concentrated in a short period of time. “We need to prepare thoroughly in advance so that both banks and borrowers can pay off their debts intentionally. “I do.”
Reporter Park Jong-seo/Oh Hyun-ah [email protected]