[태영發 건설업계 위기]
Second-tier financial institutions lend to businesses with low credit. Concerns over the spread of insolvency are greater than those of first-tier financial institutions, so the Bank of Korea said, “We will take action in cooperation with the government.”
With Taeyoung Construction’s application for a workout (corporate improvement work), there are concerns that insolvency in real estate project financing (PF) could spread to secondary financial institutions such as securities companies and savings banks. Second-tier financial institutions, such as banks, which have greater real estate exposure (risk exposure) than first-tier financial institutions, are bound to be more vulnerable to crisis response.
The real estate PF loan balance of secondary financial institutions is smaller than that of banks and insurance, but the delinquency rate is significantly higher. According to the Financial Services Commission, as of September this year, the balance of real estate PF loans from securities companies was 6.3 trillion won, with the delinquency rate reaching 13.85%. The delinquency rate of savings banks with a loan balance of 9.8 trillion won was 5.56%. Credit finance companies such as credit cards recorded a loan balance of 26 trillion won and a delinquency rate of 4.44%. Mutual financial institutions such as Nonghyup and Suhyup have a loan balance of 4.7 trillion won and a delinquency rate of 4.18%.
The scale of exposure to real estate PF loans in the secondary financial sector is at an all-time high. According to the Bank of Korea, as of the end of September last year, the real estate PF exposure index for credit finance companies, savings banks, and securities companies had soared 4.33 times, 2.50 times, and 1.67 times, respectively, compared to five years ago.
Usually, second-tier financial institutions lend money to low-credit businesses that have difficulty receiving bank loans, so the risk is bound to be high. According to the Korea Institute of Finance, savings banks accounted for the highest proportion of bridge loans (initial business loans) in all PF loans at 58%. This was followed by capital companies (39%) and securities companies (33%). A bridge loan is a loan invested in the early stages of a real estate development project before construction begins, and there is a high possibility that it will be forfeited if construction cannot proceed due to a recession in the real estate economy.
Accordingly, the Bank of Korea also stated in its ‘Financial Stability Report for the Second Half of 2023’ published on the 28th, “If the real estate economy shrinks again, the risk of loss for financial institutions related to real estate PF may increase,” and “Especially financial institutions that are assessed as having insufficient capacity to absorb losses. “Institutions may face difficulties in managing liquidity if deposits are withdrawn, along with concerns over deterioration in asset quality,” he warned. Lee Jong-ryeol, Deputy Governor of the Bank of Korea, said on this day, “If the market impact (of Taeyoung Construction’s workout application) increases, we will take necessary measures in cooperation with the government.”
Experts believe that the government’s response will be the most important variable in preventing the spread of the crisis in the future. Ha Jun-kyung, a professor of economics at Hanyang University, warned, “If the government fails to respond properly, situations like Legoland may repeat themselves, especially in the secondary financial sector, which is more vulnerable to risk.” Professor Emeritus Kim Jeong-sik of the Department of Economics at Yonsei University also said, “The high interest rate trend will be maintained in the second half of next year, so the authorities need to take action early.”
Reporter Shin A-hyung abro@donga.com
2023-12-28 18:00:00
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