The Financial Services Commission plans to complete a full inspection of special purpose companies (SPCs) holding long-term arrears bonds within the first half of this year. After reporting the results to the presidential office, it plans to share the details with the Korea Asset Management Corporation (KAMCO) to encourage SPCs to participate in the New Leap Fund. After President Lee Jae-myung recently called the private bad-debt workout company "Sangnoksu (Sangnoksu No. 1 Specialty Securitization Company)" "predatory finance," related measures appear to be accelerating.
According to the financial authorities on the 26th, the Financial Services Commission (FSC) plans to finish, by next month, identifying the list of SPCs holding long-term arrears bonds and the size of the bonds they hold, together with the Financial Supervisory Service, KAMCO, and the Korea Credit Information Services. Once KAMCO secures the list of SPCs, it is expected to be able to make additional purchases of the bonds they hold.
President Lee recently said of Sangnoksu's collection of long-term arrears bonds, "I didn't know such primitive predatory finance was still brazenly surviving, tightening the noose on ordinary people." Sangnoksu is an SPC established in Oct. 2003 with the participation of 10 financial institutions to resolve bad debts of credit delinquents during the credit card crisis.
The Lee Jae-myung administration last year launched the New Leap Fund to help vulnerable groups make a fresh start by clearing long-term arrears bonds of 50 million won or less that are more than seven years old. Under the plan, KAMCO purchases long-term arrears bonds from financial companies that joined the New Leap Fund's voluntary agreement and then cancels them or supports debt restructuring. Sangnoksu did not transfer arrears bonds to the New Leap Fund, and financial companies that participated as shareholders reportedly received about 42 billion won in dividends over the past five years.
After the president's criticism, Shinhan Card, Hana Bank, Industrial Bank of Korea (IBK) and others holding Sangnoksu bonds collectively sold their long-term arrears bonds from Sangnoksu to the New Leap Fund. In addition to Sangnoksu, as cases of long-term arrears bond collection by SPCs such as KB Star and Genesis emerged one after another, the financial authorities recently launched a full inspection.
An official at the Financial Services Commission (FSC) said, "It will take some time because we need to separately identify the bonds subject to sale to the New Leap Fund, but we plan to complete the inspection as quickly as possible."