To improve the soundness of the regional credit guarantee system, the government will in principle abolish full guarantees (100% guarantee ratio) and pursue measures to lower the subrogation payment rate to the 3% range by 2030.
The Ministry of SMEs and Startups said on the 19th that it announced the "plan to build a sustainable guarantee support system," prepared jointly with related ministries, at a meeting of the Emergency Economic Inspection TF and the ministers of economic affairs presided over by Deputy Prime Minister and Minister Koo Yun-cheol of the Ministry of Economy and Finance on the 19th.
With this package, the government set a goal of lowering the regional credit guarantee foundations' subrogation payment rate, which stood at 5.07% at the end of last year, to around 3.2% by the end of 2030, and raising the share of guarantees supplied to areas outside the greater Seoul area to 70% in the same period.
First, to correct excessive guarantee practices, full guarantees operated at a 100% guarantee ratio will, in principle, no longer be allowed. However, if a regional credit guarantee foundation secures its own resources, the system will be revised so it can provide guarantees on its own without reinsurance.
The guarantee screening system will also be overhauled. Moving away from assessments centered on financial condition and credit ratings, evaluation items will be expanded to use nonfinancial data such as commercial district information, and the management evaluation of the 17 regional foundations will be improved to reflect qualitative outcomes rather than focusing mainly on quantitative indicators.
The government will also address delays in terminating guarantees identified during the Ministry of SMEs and Startups (MSS) audit. When loan repayment is completed, related notification procedures will be streamlined so that guarantee termination can proceed quickly, and for borrowers who repay debt after subrogation payment, an upper limit on the repayment period will be set and applied.
To ensure the soundness of the reinsurance system, the reinsurance ratio, currently above 50%, will be lowered to around 30%. However, for guarantees for mid- to low-credit borrowers, the reinsurance ratio will be maintained at 50%–60% to prevent a contraction in financial support. A review process will be newly introduced in decisions on reinsurance limits, and management and inspection of guarantees accompanied by reinsurance will be strengthened.
The cleanup of nonperforming loans will also be accelerated. For claims with low recoverability, the requirements for write-off and write-down will be eased and approval procedures simplified, with a plan to resolve a total of 2.2 trillion won in nonperforming loans by 2030.
Improvements to support second chances are also included. For corporations whose public information registrations have been lifted due to write-offs, new guarantees will be permitted, and guarantee restrictions for businesses with past unpaid debt records will be partially eased. A system will also be established to identify small business owners showing early signs of distress and connect them to tailored policy support.
An indirect disaster special guarantee for small business owners affected by disasters will be newly introduced, and a special guarantee totaling 170 billion won will be supplied for credit-vulnerable groups and small business owners in depopulating areas.
A special guarantee offering preferential reinsurance benefits will be created for outstanding guarantee products jointly identified by regional foundations and local governments, with total support of 2 trillion won by 2030. In addition, beyond support focused on individual firms, the government plans to introduce a "commercial district growth support special guarantee" to back joint growth at the commercial-district level.
Support will also increase for small business owners with high growth potential. Growth-type small business owners will be exempt from the maximum guarantee cap of 800 million won, and application and screening criteria for existing programs, such as guarantees for entrepreneur-type small business owners, will be revamped to match on-the-ground demand.
Among the measures, administrative steps will be implemented in stages starting in the second half of this year, and for items requiring legal amendments, such as establishing the basis to use tax information, a bill to amend the Regional Credit Guarantee Foundation Act will be prepared by the end of this year.