Interest deferment and other measures may be extended
Loan forbearance and the easing of financial regulations may be extended, with the Financial Services Commission (FSC) saying that a decision will be made on the matter by the end of the month. It also urged the financial sector to offer support so the country can achieve an economic turnaround.
“To prepare for a longer-than-expected pandemic, we will review whether to extend temporary measures,” FSC Vice Chairman Sohn Byung-doo said at a meeting held Wednesday at the Korea Federation of Banks building in Jung District, central Seoul. “This includes extending the maturity of loans, interest payment suspensions and the relaxation of financial regulations. We plan to finalize our decision this month.”
He urged the financial sector to actively support the real economy, amid concerns on the part of banks about the more than 39.1 trillion won ($33.2 billion) of debts accumulated in the course of government’s financial support plan announced in February.
“During an economic downturn, financial companies are likely to be passive in supporting the real economy. Once these actions accumulate and not enough support goes to the real economy, it can cause an economic recession,” Sohn said.
Local banks have temporarily extended the maturity of loans and suspended interest payments in line with the government's Covid-19 financial support plan to help small- and medium-sized businesses and their owners. These measures were scheduled to expire in September.
As of last month, around 37.1 billion won of interest has been deferred by second-tier financial institutions, according to the FSC. Analysts say the deferred amount may be as large as 80 billion won if unpaid interest from the five main commercial banks are added.
Regarding concerns of a second wave of infections, Vice Chairman Sohn urged the industry to “go back to basics and undertake disinfection efforts.” He requested financiers to “lower the density at high-risk facilities like call centers” and asked each institution to “follow strengthened disinfection guidelines from the government.”
The remarks follow reports of Covid-19 infections at NH Card and KB Kookmin Saving’s Bank call centers ultimately traced back to the Sarang Jeil Church.
The FSC also plans to strengthen support for flooded areas. It will open a “comprehensive financial support center” together with financial authorities, government officials and financial companies. Personnel at the center will consult with flood victims and provide them with necessary financial support.
BY AHN HYO-SUNG, KANG JAE-EUN [firstname.lastname@example.org]