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Korea Herald
a day ago
- Business
- Korea Herald
Korea's bad bank returns: Who it helps, who it hurts, and why now?
Debt aid for 1 million sparks debate over fairness and cost The South Korean government's plan to launch a 'bad bank' to ease the burden on individuals struggling with loan or debt repayment has drawn mixed reactions. Some view the initiative as a safety net for the financially vulnerable and a means to reduce the strain of bad debt on the broader financial system. Others raise concerns over moral hazard and potential fiscal pressure on the economy. What is bad bank? A bad bank is not a traditional bank; it is a special-purpose financial entity created to acquire and manage non-performing assets or bad loans from existing lenders. It purchases these loans at a small fraction of their original value and offers flexible repayment options based on the debtor's willingness and ability to settle. In many cases, it allows borrowers to repay only a portion of the principal, forgiving the remainder. During his election campaign, President Lee Jae Myung pledged to establish a bad bank to relieve the financial burden of indebted individuals, particularly small business owners whose debts surged during the COVID-19 pandemic. A significant portion of these debts, amounting to roughly 50 trillion won ($36.4 billion), is set to mature in September. Lee is no stranger to the concept. As mayor of Seongnam City, he founded Jubilee Bank, a nonprofit organization that provided debt relief for long-term delinquent borrowers. Bad bank v.2025 On Thursday, the Financial Services Commission unveiled the details of the proposed bad bank in conjunction with the announcement of a new supplementary budget. The bad bank will be established as a corporation under the Korea Asset Management Corporation, the state-run non-performing loan resolution agency. The government will allocate 400 billion won from the supplementary budget, with an additional 400 billion won expected from private financial institutions, including commercial banks. The initiative is aimed at providing debt relief to financially vulnerable individuals and small business owners who are more than seven years overdue on unsecured loans of up to 50 million won. According to government estimates, the program will target non-performing loans totaling 16.4 trillion won, potentially benefiting around 1.13 million individuals. After acquiring these delinquent loans, the bad bank will assess the debtor's income and assets to determine whether to write off or restructure the debt. Borrowers earning less than 60 percent of the median income, who have no disposable assets and are deemed incapable of repayment, will have their debts fully forgiven. Others who are considered highly unlikely to repay may see up to 80 percent of their principal reduced and will be allowed to repay the remaining balance over 10 years. The FSC said it plans to begin discussions with financial institutions regarding their funding contributions as soon as the supplementary budget is finalized, and will also revise relevant regulations to facilitate the launch. Mixed outlook Some experts view the bad bank as a way to create a social safety net, reduce financial strain and even stimulate private consumption, ultimately contributing to a healthier financial system. Specialized credit finance companies, such as credit card issuers and installment financing firms, are expected to benefit from the program, as the sale of distressed assets would improve their financial standing. 'Korea has experience operating bad banks during major economic crises. Based on this experience, a bad bank can help swiftly resolve non-performing assets and stabilize the financial system,' said Kim Sang-in, a credit analyst at Shinhan Securities. However, the initiative may burden private financial institutions, which are expected to contribute a total of 400 billion won. An FSC official said the regulator had reached a 'mutual consensus' with the sector regarding the scale of contributions. Still, some in the banking industry suggest this consensus may not be entirely voluntary. In 2023 alone, banks contributed a combined 2 trillion won to a similar initiative. 'As a licensed business, it is difficult for a bank to reject a request made by the regulator,' said an official at a local commercial bank.
Korea Herald
4 days ago
- Business
- Korea Herald
S. Korea vows enhanced market monitoring, swift responses amid Middle East crisis
The government will enhance monitoring of the economy and financial markets and devise appropriate responses based on contingency plans amid escalating tensions in the Middle East, the finance ministry said Thursday. The pledge was made during a meeting on macroeconomic issues presided over by Acting Finance Minister Lee Hyoung-il and attended by Bank of Korea Deputy Gov. Ryoo Sang-dai, along with senior officials from the Financial Services Commission and the Financial Supervisory Service, according to the Ministry of Economy and Finance. "Following Israel's airstrike on Iran, volatility in commodity prices and global financial markets has increased," Lee said. "The domestic financial market remains relatively stable, but uncertainty remains high due to the Israel-Iran conflict, as well as unclear US tariff policies," he added. In response, the government is "on alert, closely monitoring the situation and continuing to operate a 24-hour monitoring system," Lee said, adding that a joint emergency response team involving relevant agencies is currently in operation. "The government will respond swiftly, in close coordination with relevant agencies, if necessary, in accordance with contingency plans based on various scenarios," Lee stated. (Yonhap)
Korea Herald
7 days ago
- Business
- Korea Herald
Govt. to take prompt, decisive action in case of excessive market volatility amid Middle East tensions
The government said Monday it will take prompt and decisive action in the case of any excessive market volatility stemming from rising tensions in the Middle East, following a preemptive Israeli strike on Iran. The decision was made during a virtual meeting that brought together senior officials from the finance, foreign and industry ministries, as well as representatives from the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service, according to the Ministry of Economy and Finance. "In the event of excessive market volatility that is deemed to be detached from the country's economic fundamentals, authorities plan to take prompt and decisive action in accordance with contingency plans," the ministry said. Participants in the meeting stressed the importance of closely monitoring both financial markets and the real economy, given the ongoing military clashes between Israel and Iran over the weekend and the high uncertainty surrounding future developments. Authorities also pledged to ensure stable energy supply management and minimize disruptions to trade and logistics, the ministry said. Measures include liquidity support for exporters affected by the conflict in the Middle East and securing dedicated shipping space for small and medium-sized enterprises. (Yonhap)
Coin Geek
13-06-2025
- Business
- Coin Geek
South Korea unveils bill to allow stablecoin issuance
Getting your Trinity Audio player ready... Under recently elected president Lee Jae-myung, South Korea's ruling party introduced the Basic Digital Asset Act on June 10, allowing local stablecoins issuance whilst relaxing rules for digital asset exchanges. Under the proposed legislation, instead of the Bank of Korea (BOK)—South Korea's central bank—approving stablecoin issuers, the authority will fall to the country's top finance sector watchdog, the Financial Services Commission (FSC). The bill also stipulates that local companies can issue stablecoins with a minimum equity capital of 500 million won ($368,000), down from a previously proposed 5 billion won (roughly $3.6 million), significantly reducing the regulatory barrier to entry. In another mandate, issuers must also guarantee refunds through reserves. South Korean stablecoin trading is surging, with transactions involving the leading U.S. dollar stablecoins reaching 57 trillion won ($42 billion) on five main domestic exchanges in the first quarter, according to Bank of Korea data reported by the Korean Economic Daily. The new legislation is expected to further encourage this trend. Whilst stablecoin provisions were front and center of the Basic Digital Asset Act, it also proposed relaxed rules for digital asset exchanges, enabling them to participate in lending and choose which tokens to list. It's hoped this measure will support the country's booming digital asset space, where a total of 16.29 million people had accounts at the top five domestic virtual asset exchanges—Upbit, Bithumb, Coinone, Korbit, and Gopax—as of late February, according to data submitted to Rep. Cha Gyu-geun of the minor opposition Rebuilding Korea Party, as reported by local outlet Yonhap News. This data shows that participation in the digital asset market is nearly 32% of South Korea's population. Another 'crypto'-President takes office President Lee, the progressive leader of the Democratic Party of Korea, defeated his conservative rival Kim Moon-soo in last week's snap presidential election. Kim's loss is perhaps unsurprising, as he came from the same party as impeached president Yoon Suk Yeol, who plunged the country into chaos after he attempted to impose martial law, eventually resulting in his impeachment. The new President Lee, has been a vocal proponent of stablecoin adoption and appears to be moving quickly to deliver on his campaign pledge to allow local companies to issue stablecoins. 'We need to establish a won-backed stablecoin market to prevent national wealth from leaking overseas,' said Lee, during a policy discussion in May. In addition to his stablecoin ambitions, Lee also advocated for South Korea's national pension fund to invest in digital assets and pledged to permit the launch of Bitcoin exchange-traded funds (ETFs) in the country. However, Lee's digital asset plans are facing some resistance from the central bank, with BOK Governor Rhee Chang-yong warning last month that non-bank stablecoins could weaken the effectiveness of monetary policy, while Yonhap News described the BOK's reaction as 'panic.' Central bank sources have also previously argued that the BOK should be involved in the authorization process for the won denominated stablecoin. Despite such opposition, the early signs of Lee's reign point to a more United States-style embracing of the digital asset space from South Korea moving forward, taking a lead from the industry's most influential and controversial advocate-in-chief President Donald Trump. Watch: Blockchain is much more than digital assets title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Yahoo
10-06-2025
- Business
- Yahoo
South Korea's Ruling Party Wants to Allow Companies to Issue Stablecoins: Bloomberg
South Korean President Lee Jae-myung's Democratic Party submitted a bill to parliament that would allow qualifying companies to issue stablecoins, Bloomberg reported on Tuesday. The Digital Asset Basic Act is aimed at improving transparency and encouraging competition in cryptocurrency, Bloomberg said. Companies would be able to issue their own stablecoins provided they have at least 500 million won ($368,000) in equity capital and can guarantee refunds through reserves as well as receiving approval from the Financial Services Commission. Lee, voted in as president last week, made a number of promises to South Korea's crypto industry during his election campaign, appealing to the nation's 15 million crypto investors. Among them, he said the country should support a won-based stablecoin market "to prevent national wealth from leaking overseas," the Korea Herald reported. Stablecoins are tokens pegged to the value of a traditional financial asset, such as a fiat currency, with the U.S. dollar being comfortably the most prevalent. Their stability provides a counterweight to the volatility of cryptocurrencies like bitcoin BTC and ether ETH, allowing users to hold capital in digital assets without having to worry about wild swings in price. The sector, which is dominated by Tether's USDT, has experienced a surge in interest this year thanks to, among other factors, progress toward regulation of the sector in the U.S. The strength of the stablecoin sector has been highlighted in the last week by the strong performance of USDC issuer Circle's stock (CRCL) following its initial public offering (IPO). The shares more than quadrupled during the first three days of trading. In addition, market cap of the sector reached $250 billion for the first time.
