finance
Entered 2024.04.28 19:07 Modified 2024.04.28 19:07 Paper A5
From the Savings Bank and Saemaeul Geumgo
Buy a total of 400 billion won in non-performing loans
“It even sucks the demand for private corporate bonds.”
The theory of the role of Korea Asset Management Corporation (CAMCO) is rapidly emerging. This is due to growing concerns about the insolvency of real estate financing (PF) projects around secondary financial institutions such as savings banks and Saemaeul Geumgo. However, as Camco does not have enough financial resources either, it hardly seems to be catching up by issuing bonds. In a situation where high interest rates continue, it is noted that the bond markets and short-term funds could freeze if public bonds with excellent credit ratings are poured into the market.
According to the financial sector on the 28th, KAMCO is following a plan to buy 400 billion worth of non-performing loans, won 200 billion each, from savings banks and Saemaeul Geumgo. This is to alleviate growing concern as delinquency rates in savings banks and Saemaeul Geumgo soar.
The problem is that KAMCO is also suffering from financial troubles. This is because most of the financial resources have been exhausted in the implementation of the New Start Fund, a debt modification program for small business owners and the self-employed. According to the Korea Securities Depository, KAMCO issued public bonds worth 800 billion won in the first quarter of this year. Last year, 40.5% of the annual public bond issue amount was achieved in a quarter. This is equivalent to the annual issuance amount in 2021 (KRW 1 trillion) and 2022 (KRW 1.11 trillion). The market expects that KAMCO will further increase the amount of public bond issuance after the second quarter.
KAMCO is not alone in the increase in public bond issuance linked to the PF crisis. The Housing and Urban Guarantee Corporation (HUG) also changed its articles of incorporation this year to prepare the basis for issuing public bonds. Previously, it was not possible to issue bonds directly, but now it is possible to issue public bonds directly. HUG also offers various support measures in the restructuring process for a soft landing in real estate PF. The total number of maturing public bonds will increase from 2 to 3 trillion won per month in the first quarter to 4 to 5 trillion won in the second quarter. There are concerns in the market that public bonds could lead to a ‘crowding effect’ which sucks the demand for corporate bonds from private companies. When companies such as KAMCO with a very high credit rating (AAA) issue bonds, the interest rate on public bonds will rise, which can gradually affect the financing of banks and general companies. At the end of 2022, when the Legoland incident occurred, Korea Electric Power Corporation (KEPCO) bonds were considered the main culprit in the market funding crunch. At the moment, there is a lot of liquidity in the bond market, so it is analyzed that there are no major problems at the moment. Geopolitical risks originating from the Middle East and the fact that interest rates are rising again due to prolonged inflation are considered variables. The interest rate on 10-year US government bonds increased from 3.8% at the start of the year to 4.6% on the 26th. An official from the financial sector expressed concern, “If the supply and demand burden increases due to the expansion of KAMKO’s bond issuance during a period of rising interest rates, the bond market may be in shock.”
Reporter Seo Hyeong-kyo seogyo@hankyung.com
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