Bank Group Heads “Agree” to Extend Deferral of Small Business Loans

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Financial Services Commission Chairman Eun Sung-soo (front right) greets the heads of South Korea’s five major banking groups at a panel discussion for a loan deferral program for companies affected by the pandemic of COVID-19. The event was held at the headquarters of the Korean Federation of Banks in central Seoul on Tuesday. From left to right: Son Byung-hwan, Chairman of Financial Group NH NongHyup, Sohn Tae-seung, Chairman of Financial Group Woori, Yoon Jong-kyoo, Chairman of Financial Group KB, Kim Jung-tai, Chairman of Financial Group Hana and Cho Yong-byoung, chairman of Shinhan Financial Group. (Yonhap)

The heads of five major banking groups here agreed on Tuesday to extend their joint loan deferral program for local businesses affected by the COVID-19 pandemic by six months in an exclusive meeting with the chairman of the Services Commission. financial, Eun Sung-soo.

“The heads of the banking groups have agreed to extend the program for an additional six months,” Eun told reporters after a roundtable meeting with the group’s leaders at the headquarters of the Korean Federation of Banks in Korea. central Seoul.

Financial Group Chairman Hana Kim Jung-tai, Financial Group Chairman Woori Sohn Tae-seung, Financial Group Chairman Shinhan Cho Yong-byoung, Financial Group Chairman NH NongHyup Son Byung-hwan and Financial Group Chairman KB Yoon Jong-kyoo attended the meeting.

Tuesday’s decision marks the third time the government has asked banking groups and its flagship lenders to extend loan terms or delay interest payments to help struggling small businesses and self-employed people.

The program – launched in February – was originally scheduled to end in September of last year, but the deadline was extended to March 31 on the government’s second request for postponement. The program is currently scheduled to end in September.

(Yonhap)

(Yonhap)

While the extension is expected to elicit a positive response from borrowers, critics have voiced concerns that it could propel the country’s loan default rate and pose risks to the fiscal strength of banks.

Regarding this, Eun told reporters that there is currently no choice but to “take the risk.” He added that he believes banking groups recognize the associated risks and are able to manage them.

However, Eun and the banking group heads reached a consensus on developing “soft landing measures” to cushion the risks.

The default rate on won-denominated loans from South Korean banks fell in December last year on a month-to-month basis, according to financial watchdog data released last week. However, there are concerns that the rate will skyrocket once the deferral program ends.

The rate on bank loans overdue for more than 30 days stood at 0.28% at the end of December, down 0.07 percentage point for the month. The default rate on bank loans also fell by 0.09 percentage point from the previous year.

By Jung Min-kyung ([email protected])

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