Financial firms are collectively selling the arrears bonds held by private bad bank "Sangnoksoo," which was jointly funded by banks and card companies during the 2003 credit card crisis. The move follows President Lee Jae-myung's criticism of Sangnoksoo's collection of long-term arrears bonds as "predatory finance."
According to the financial industry on the 12th, Shinhan Card will sell the entirety of the long-term arrears bonds corresponding to its equity share in Sangnoksoo to the New Leap Fund of the Korea Asset Management Corporation (KAMCO).
Hana Bank, KB Kookmin Bank, and Woori Card also decided to sell to KAMCO's New Leap Fund the entirety of the long-term arrears bonds corresponding to each equity share held by Sangnoksoo. KB Kookmin Card, which holds equity but has no separate bond balance, also decided to agree to the bond sale. IBK Industrial Bank of Korea will also proceed with an equity sale. Under Sangnoksoo's articles of association, consent of all shareholders is required to sell bonds.
Sangnoksoo (Sangnoksoo First Special Purpose Securitization Company) is a special purpose company (SPC) established in Oct. 2003 with the participation of 10 financial institutions to dispose of nonperforming loans of credit delinquents during the credit card crisis.
Shinhan Card holds the largest equity at 30%, with Hana Bank, IBK Industrial Bank of Korea, and Woori Card each at 10%, and KB Kookmin Bank and KB Kookmin Card at 5.3% and 4.7%, respectively. The remaining stakes are held by three lending companies at 10% each. Lending companies and others are also said to have decided to sell the bonds they hold.
Earlier, the Lee Jae-myung administration launched the "New Leap Fund" to help vulnerable groups restart by clearing long-term arrears bonds of 50 million won or less that are at least seven years old. KAMCO purchases long-term arrears bonds from financial firms participating in the New Leap Fund's voluntary agreement to extinguish them or support debt restructuring. However, Sangnoksoo did not transfer the relevant arrears bonds to the New Leap Fund, and financial firms participating as shareholders are said to have received about 42 billion won in dividends over the past five years.