Regulator vows measures to prevent contagion from risks of property financing

▲ Lee Bok-hyun, governor of the Financial Supervisory Service (FSS), speaks at a press conference held at the FSS headquarters in western Seoul on Feb. 5, 2024. (Yonhap)

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Regulator vows measures to prevent contagion from risks of property financing

SEOUL, Feb. 5 (Yonhap) -- Financial authorities will spare no effort this year to prevent risks of real estate project financing from spreading into overall financial markets, the head of the financial regulator said Monday.

Lee Bok-hyun, governor of the Financial Supervisory Service (FSS), said the regulator will persuade financial firms to swiftly address credit risks from real estate project financing (PF) loans.

Calling risks of real estate PF a "detonator" of the South Korean economy Lee said the regulator will encourage financial firms to expand their ability to absorb losses stemming from PF loans.

Lee also warned that financial firms face stern punishments if they make wrong decisions to avoid losses or neglect their responsibilities.

Short-term loans involving real estate projects have emerged as a major risk factor for the financial sector after Taeyoung Engineering & Construction Co., the country's 16th-largest builder, filed for a debt restructuring program late last year.

The delinquency rate on PF loans has more than doubled to 2.42 percent as of end-September from 1.19 percent at end-2022, according to the FSS.

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