[사설] Liquidation of real estate PF insolvency, ‘holding on’ must be strictly controlled

The Financial Supervisory Service will convene CEOs of savings banks with many unorganized real estate project financing (PF) operations early next month. It is said that an on-site inspection is also being considered. The intention is to look into whether the resolution of insolvent PF is being intentionally delayed.

Savings banks, along with Saemaeul Geumgo, are the core of real estate PF risks. Among the four stages of the Financial Supervisory Service’s business feasibility evaluation criteria, mutual finance companies such as Saemaul Geumgo account for the largest proportion of businesses with high risk (C grade) and insolvency concerns (D grade) at 47.1%. Savings banks are next at 21.4%, followed by securities companies at 12.5% ​​and capital companies at 8.7%.

It is questionable whether the savings bank is responding appropriately to the seriousness of the situation. According to the financial authorities on the 27th, out of about 12 trillion won in PF businesses subject to auction and public auction, 1.9 trillion won (15.8%) has been liquidated. Saemaul Geumgo disposed of about 700 billion won (26%) of the 2.7 trillion won. On the other hand, savings banks accounted for only 180 billion won (8%) of the 2.1 trillion won in target businesses. This is a lower resolution performance than the securities industry (13.5%).

base interest rate We need to examine whether the fluke mentality of trying to overcome the crisis by taking advantage of the price cut trend is increasing risks. In fact, there is a vague expectation throughout the industry that losses will be recovered once the real estate industry recovers thanks to changes in interest rates. According to Korea Asset Management Corporation Onbid, most savings banks set auction and public auction bidding prices of 120-130% of the loan principal. There is no choice but to see the holding strategy as rampant. To prevent the privatization of profits and the socialization of losses, we must not tolerate gutsy behavior. The controversy over a type of ‘parking transaction’ in which some savings banks hand over non-performing loans to funds that invested money instead of auctions or public auctions is also disturbing.

According to the Financial Supervisory Service, 21 trillion won (9.7%) of the 216.5 trillion won PF exposure of the entire financial sector as of the first half of the year is subject to restructuring. The number of non-performing loans with overdue principal and interest payments for more than three months is rapidly increasing, and the delinquency rate is soaring alarmingly. There are more than one or two places where a scalpel needs to be applied. There is no reason for a surgery full of foul play and tricks to work properly. Moral hazards in specific industries must be prevented before they spread to the overall financial industry.

There is a long way to go until a soft landing in real estate PF. Land mortgage loans, a product exclusive to second-tier financial institutions that provide loans using land as collateral in the early stages of a business, are also unusual. As of the end of June, Todam University’s delinquency rate of 24.1 trillion won rose 8.34 percentage points (p) in one year to 14.42%. In some regions, the delinquency rate is as high as 22%.

What is urgent for real estate PF restructuring is not only on-site evolution. System improvement is also urgently needed. It is time to overhaul the developer’s low-capital and high-leverage structure, which is causing serial real estate PF insolvency. According to the Korea Development Institute (KDI), domestic developers are carrying out projects worth 100 trillion won with only 3% of the total project cost. We cannot allow this reckless business model that is jumping into the fire pit carrying the fire. It is one-tenth of the capital ratio of 30-40% in advanced countries such as the United States. It is also urgent to pass and implement the Real Estate Development Project Management Act jointly proposed by the ruling and opposition parties with the goal of establishing a management system that can understand PF projects at a glance.