South Korea to continue financial support for business hit by pandemic

South Korea’s Finance Minister said Thursday that the details of the COVID-19 financial support programs nearing their expiration will be “decided by early March,” indicating the government’s willingness to continue the programs.

“The details of all the financial sector’s loan programs regarding its extension of maturities and delay of interest payments will be decided by early March,” Finance Minister and Deputy Prime Minister Hong Nam-ki said ahead of a meeting of economic policy chiefs. The meeting was attended by Hong and heads of the policymaking Financial Services Commission, the watchdog Financial Supervisory Service and the Bank of Korea.

“While the BOK’s special loan scheme – which has done its part – will be wrapped up, other more imminent financial support crucial for economic recovery will continue,” he added.

Hong also indicated that the country will keep upholding the expansionary fiscal policy, pointing to the “ongoing damages inflicted to the economy by the coronavirus.”

Hong’s remark follows a roundtable meeting between chiefs of five major banking group here and FSC Chairman Eun Sung-soo on Tuesday, where they “agreed” to extend their joint loan deferment program for local businesses hit by the pandemic by another six months. The program, launched in February last year, was set to end March 31, following the government’s previous delay request last year.

While the banks are expected to carry on with their loan deferment programs, the BOK ended its 10 trillion won ($8.9 billion) special loan scheme for local banks, brokerages and insurers on Feb. 3. The program was launched in May last year to allow banks, brokerages and insurers to borrow loans from the central bank against collateral to provide cushion for their potential funding squeeze.

The central bank has left room for the resumption of the program, but it is likely to keep it closed for the time-being as it noticed “the financial markets have stabilized and liquidity conditions for securities firms and other financial institutions also improved.”

Alongside the loan programs, Hong highlighted the government’s preparations for measures for the nation’s snowballing household loans, saying that there is a need to keep a tighter rein on the matter. The government plans to announce measures to upgrade management of the household loans by the end of the first quarter.

South Korea’s household loans came to 988.8 trillion won as of end-December 2020, up 100.5 trillion won from the previous year and marking the record on-year gain since 2004, when the BOK began compiling the data.

By Jung Min-kyung (mkjung@heraldcorp.com)