SEOUL : South Korea’s financial regulator announced on Wednesday a series of measures, including an asset-backed commercial paper plan, to prevent a credit crunch in domestic financial markets from real estate projects-related risks.
Among the steps were an extension to the country’s Project Financing-Asset Backed Commercial Paper (PF-ABCP) purchasing programme, which was set up last November in response to a liquidity crunch triggered by the default of the state-backed Legoland project.
The Financial Services Commission said in a statement the 1.8 trillion won ($1.36 billion) programme will be extended by nine months to run until next February. So far, a total of 504.5 billion won has been utilised, of which just 103.2 billion won currently remain on the book.
The Commission said the measures are prepared “pre-emptively”, with delinquency rates for real estate PF loans expected to rise continuously and the total amount of PF-ABCP guarantees remaining at a similar level to late last year, despite recent stabilisation of the short-term money markets and securities firms’ currently manageable risk levels.
The measures also include those for inducing securities firms to convert their PF-ABCP guarantees into loans of the same maturities, swiftly clear off bad bonds to resolve the issue of maturity mismatch and improve their financial standings, the Commission said.
($1 = 1,320.9300 won)
