SEOUL (Reuters) – South Korea’s financial market watchdog gathered local securities firms on Thursday to assess real estate-related risks and urged for thorough and preemptive preparation against them amid concerns the number of overdue loans could rise.
The Financial Supervisory Service (FSS) called on the firms, which are akin to investment banks, to swiftly write off or restructure non-performing loans to manage debt delinquency rates and accumulate enough capital for absorbing potential losses, it said in a statement.
Earlier this month, a local credit union was hit by customer withdrawals after media reports about a rise in its non-performing loans related to real estate projects, sparking worries about a liquidity shortage at the union and other financial institutions.
“The amount of overdue real estate project financing at securities firms is currently judged to be at a tolerable level, but I request for thorough and preemptive preparation, with the worst case scenario in mind, to prevent any trouble,” Deputy Governor Hwang Seon-oh said at the meeting.
Hwang met with chief risk officers and investment banking executives from 10 securities firms, who shared the authorities’ view on real estate-related risks and agreed to implement risk management measures, according to the statement.
Authorities will now step up monitoring of securities firms’ exposure to real estate projects to prevent any liquidity risks and engage intensively with those of high vulnerability, the FSS said.
(Reporting by Jihoon Lee; Editing by Jamie Freed)
