Seoul to unveil property debt measures next week

SOUTH Korea plans to announce measures for troubled project-finance debt next week in an effort to ease the stress in banking and real estate businesses, according to the nation’s financial watchdog chief.

The government will roll out a normalisation plan for project financing sites as restructuring shouldn’t be delayed any further, Lee Bokhyun, governor of the Financial Supervisory Service, said in a meeting with foreign press on Thursday (May 9). 

Some of them might see losses during the process but “the aim is not to kill developers but to encourage changing hands at lower prices to create a virtuous cycle and get money flowing into the sector,” Lee said. “Most worries on project finance-related problems will disappear after the announcement next week.”

Lee’s comments come as the real-estate sector has been showing cracks after the Bank of Korea increased interest rates to a 15-year-high. Delinquency rates at one key group of Korean lenders nearly doubled to 6.55 per cent last year, while economists at Citigroup estimate US$81 billion of project-finance debt is “troubled.”

While details of the plan haven’t been finalised, targets for restructuring would mostly be project finance sites in a very early stage where construction hasn’t started, according to Lee.

Separately, the FSS aims to complete its short-selling investigation into 14 global banks “within this year,” Lee said. BLOOMBERG