ID :
190901
Fri, 06/24/2011 - 19:42
Auther :
Shortlink :
https://oananews.org//node/190901
The shortlink copeid
Regulator to inject 1.4 tln won to buy bad property loans
(ATTN: UPDATES with more details in first 10 paras)
SEOUL, June 24 (Yonhap) -- South Korea's financial regulator said Friday it plans to inject 1.4 trillion won (US$1.29 billion) to buy up bad property project finance (PF) loans from savings banks as part of its efforts to prop up the ailing sector.
The move will help buy up 1.9 trillion won worth of sour loans equivalent to 27 percent of the 7 trillion won in outstanding PF loans, the Financial Services Commission (FSC) said.
The FSC and its executive body, the Financial Supervisory Service, made the decision after it conducted stress tests between May 30 and June 9 on 469 property projects financed by 89 savings banks.
The review showed that 53.5 percent of all loans equivalent to over 3.3 trillion won were bad or liable to go bad down the road.
"The latest purchase is designed to promote the stability of the savings banking sector and encourage industry players to take self-rescue measures," the regulator said in a statement.
Under the plan, the Korea Asset Management Corp. (KAMCO) will use its state restructuring fund to buy the non-performing property loans at 70-80 percent of their book values.
The FSC said that if interest on the PF loans to be purchased are included, the latest move will be equal to buying up 2.2 trillion won worth of PF loans from troubled institutions.
The financial regulator added that while it plans to sell the PF bonds on the market in due course, it will give the savings banks the option to buy them first if they are able to do so.
It said the 45 savings banks that will turn over its bad loans to KAMCO have been ordered to implement tough self-restructuring measures by late August so they can attain a capital adequacy ratio of 8 percent set by the Bank for International Settlement.
"The savings banks that want to gain some breathing room by turning over their bad loans will be required to make reciprocal measures," the FSC stressed.
The measures marks the government's fourth purchase of soured PF loans from savings banks. Between December 2008 and June 2010, the government purchased 5.4 trillion won worth of bad debts.
Seoul has been pushing to salvage savings banks struggling from deteriorating asset qualities, caused by defaults on property PF loans. A prolonged slump in the housing market crippled builders' ability to repay loans, which led to a pileup of soured PF loans on savings banks' balance sheets.
A total of eight savings banks underwent business suspensions earlier this year due to capital shortage stemming from such loans.
SEOUL, June 24 (Yonhap) -- South Korea's financial regulator said Friday it plans to inject 1.4 trillion won (US$1.29 billion) to buy up bad property project finance (PF) loans from savings banks as part of its efforts to prop up the ailing sector.
The move will help buy up 1.9 trillion won worth of sour loans equivalent to 27 percent of the 7 trillion won in outstanding PF loans, the Financial Services Commission (FSC) said.
The FSC and its executive body, the Financial Supervisory Service, made the decision after it conducted stress tests between May 30 and June 9 on 469 property projects financed by 89 savings banks.
The review showed that 53.5 percent of all loans equivalent to over 3.3 trillion won were bad or liable to go bad down the road.
"The latest purchase is designed to promote the stability of the savings banking sector and encourage industry players to take self-rescue measures," the regulator said in a statement.
Under the plan, the Korea Asset Management Corp. (KAMCO) will use its state restructuring fund to buy the non-performing property loans at 70-80 percent of their book values.
The FSC said that if interest on the PF loans to be purchased are included, the latest move will be equal to buying up 2.2 trillion won worth of PF loans from troubled institutions.
The financial regulator added that while it plans to sell the PF bonds on the market in due course, it will give the savings banks the option to buy them first if they are able to do so.
It said the 45 savings banks that will turn over its bad loans to KAMCO have been ordered to implement tough self-restructuring measures by late August so they can attain a capital adequacy ratio of 8 percent set by the Bank for International Settlement.
"The savings banks that want to gain some breathing room by turning over their bad loans will be required to make reciprocal measures," the FSC stressed.
The measures marks the government's fourth purchase of soured PF loans from savings banks. Between December 2008 and June 2010, the government purchased 5.4 trillion won worth of bad debts.
Seoul has been pushing to salvage savings banks struggling from deteriorating asset qualities, caused by defaults on property PF loans. A prolonged slump in the housing market crippled builders' ability to repay loans, which led to a pileup of soured PF loans on savings banks' balance sheets.
A total of eight savings banks underwent business suspensions earlier this year due to capital shortage stemming from such loans.
