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Financial firms to provide W5tr in loans for real estate projects

June 20, 2024 - 11:17 By Yonhap
Kim So-young (right), vice chairman of the Financial Services Commission (Yonhap)

Five banks and five insurance firms in South Korea agreed Thursday to provide up to 5 trillion won ($3.6 billion) in additional funding for real estate development projects.

The move comes amid government-led efforts to normalize real estate project financing ㅣloans as prices continue to rise, which include the liquidation of failing projects.

Under a memorandum of understanding signed Thursday, the five banks and five insurance firms will first create a 1 trillion-won syndicated loan and gradually expand their funding to a maximum of 5 trillion won, if necessary, according to the Financial Services Commission.

"This syndicated loan has a great significance in that the financial industry has voluntarily created the loan without any safety system, such as the absorption of losses by the public sector, to support the soft landing of real estate PF loans," FSC Vice Chairman Kim So-young was quoted as saying at the signing ceremony.

The financial regulator said the new syndicated loan will provide additional funding to projects that have "secured a certain level of business feasibility and face no legal risk."

Real estate PF loans have become a major risk factor in the financial sector amid a prolonged slump in the property market due to price hikes.

The financial regulator said earlier that the total value of outstanding PF loans stood at 134.2 trillion won as of end-March, down 1.4 trillion won from three months earlier.

The delinquency ratio on real estate PF loans, however, surged to 3.55 percent from 2.7 percent over the cited period. (Yonhap)