WED, MAY 24, 2023 - 02:06 PM                                                                                                                                                                                 published: BT TIMES

South Korea

Authorities pledged by billions of dollar to support South Korea debt markets

To avoid a repeat of last year’s turmoil, the South Korean wants brokerages to swap short-term risky property debt for longer- term borrowings.

The country financial regulator announced preemptive measure to counter rising loan delinquencies and address maturity mismatch B/W the long running real e-stet project  and short term debt used to finance them.  

Officially wants firms to convert their assets backed commercial paper into loan with tenors that match the timeline of the underlying real e-state they’re financing. Financial service Commission (FCS) and Financial supervisory service (FSS) will lower risk weights on capital ratio to encourage the step.

After property developer missed a debt payment last September, the country’s project finance system for real e-state scrutinized more closely as a result of global policy tightening.

On Wednesday (May 14), the FSC Said that Korea’s debt market has stabilized after authorities pledged billions dollar in support. However, Risk still lingers due to uncertainty about the path of interest rates globally. Korean Brokerages typically securitize long-term project financing loans into short term debt known as project-financing assets – backed commercial paper, or

PF-ABCP, which is at the heart of problem official are trying to address. There is maturity mismatch between commercial paper and underlying assets, which is usually, have a three years tenor.  

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