A bad bank that will purchase and dispose of long-term arrears bonds that have been overdue for more than 7 years will be established next month. The bad bank is scheduled to begin purchasing arrears bonds from October this year.
On the 11th, the Financial Services Commission held a meeting with experts on the long-term arrears debt adjustment program, chaired by Secretary-General Kwon Dae-young, and announced future plans. Attending the meeting were Yang Hyuk-seung, chairman of the Foundation for Support of Long-Term Small Arrears, Jung Eun-jeong, head of the Financial Welfare Center of the Seoul Welfare Foundation, and Lee Ji-yeon, lawyer at Hanaro Law Firm. Additionally, industry representatives from Korea Asset Management Corporation (KAMCO), Credit Counseling & Recovery Service (CCRS), and the Korea Banks Association were present.
KAMCO will be in charge of the practical establishment of the bad bank. The bad bank corporation will be established in August, and agreements for the purchase of arrears bonds by industry sector will be signed in September. The full-scale purchase of arrears bonds is expected to begin in October. The Financial Services Commission plans to announce detailed guidelines related to the bad bank in the third quarter. While preparing the details, the commission and KAMCO plan to set standards for controversial issues such as the disposal of foreign debt.
The Financial Services Commission requested understanding regarding the sentiment of deprived citizens who have been diligent in repayment. Secretary-General Kwon said, “We deeply understand the feelings of those citizens who have repaid faithfully, but anyone can fall into long-term arrears, and we are promoting debt adjustment as a social support system for recovery.”
Meanwhile, KAMCO will conduct a public contest for the name of the bad bank. KAMCO will receive name suggestions via its website from the 14th until August 1.