The Korea Federation of Savings Banks will carry out a paid-in capital increase of 10 billion won for its subsidiary that handles nonperforming loans (NPL) from real estate project financing (PF). As financial authorities have continuously called for stronger soundness management since last year, the aim is to expand the scale of NPL handling through the capital increase.
According to the industry on the 23rd, the Korea Federation of Savings Banks held a board meeting that day and decided to push ahead with a 10 billion won paid-in capital increase for SB NPL lend. SB NPL lend is a specialized NPL-handling subsidiary under the federation. It is responsible for internal NPL resolution within the savings bank sector.
The federation established SB NPL lend last month with capital of 500 million won. With this capital increase, capital rose to 10.5 billion won. Under the Enforcement Decree of the Lending Business Act, a lending company's total assets are limited to within 10 times its capital. With this capital increase, SB NPL lend can expand its NPL resolution capacity to as much as 105 billion won. SB NPL lend plans to begin practical NPL purchases at the end of the year.
Alongside this, financial authorities are also strengthening the savings bank sector's capacity to manage nonperforming loans. The previous day, financial authorities announced plans to amend the Savings Bank Act to expand and reorganize SB NPL lend into an asset management specialist company. Upon elevation to an asset manager, the scope of NPL management will expand to allow not only NPL purchases but also commissioned collections. Through this, financial authorities said they aim to swiftly resolve NPLs at regional savings banks that are difficult to clean up on their own, restore soundness early, and expand the capacity to supply finance in the regions.
The soundness of real estate PF in the savings bank industry remains lower than other sectors. According to the financial authorities' announcement, as of the end of June, the financial industry's PF exposure (risk-weighted assets) reached 186.6 trillion won. Among these, the PF arrears rate at savings banks was 5.14%, higher than ▲ mutual finance institutions (0.15%) ▲ banks (0.64%) ▲ insurance (1.69%), and higher than specialized credit finance companies (4.98%).