FSC Extends Market Stabilization Programs and Real Estate Regulation Easing

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FSC Holds Meeting to Review Market Conditions and Extends Operation of Market Stabilization Programs Nov 13, 2024

Vice Chairman Kim Soyoung of the Financial Services Commission held a meeting on November 13 with related organizations and market experts to go over economic and financial market conditions at home and abroad in the wake of U.S. presidential elections and Fed’s monetary policy pivot and discuss policy responses to ensure market stability.

Market Stabilization Programs

At the meeting, Vice Chairman Kim said that it is necessary to maintain backstops in order to be prepared for the potential of rising uncertainty and volatility in the market. Therefore, Vice Chairman Kim said that the market stabilization programs currently in place will continue to be operated at the same level in 2025.

In order to ensure stability in financial markets, Vice Chairman Kim said that it is necessary to take into account comprehensive factors, such as the political and economic uncertainties in major economies including the U.S., ongoing geopolitical risks in the Middle East, deepening global competition for Korea’s strategic industries and the potential of downward adjustment in GDP growth, and the restructuring and resolution of problematic real estate development projects. As it is possible that financial markets may experience a temporary rise in volatility affected by various external factors, Vice Chairman Kim said that the government and related organizations will continue to stay alert and make consistent efforts to ensure market stability.

To this end, the government and policy financial institutions (Korea Development Bank, Industrial Bank of Korea, and Korea Credit Guarantee Fund) plan to continue to make available liquidity support programs worth up to KRW37.6 trillion to ensure stability in the corporate bond and money markets in 2025, which include the following—(a) bond market stabilization fund of up to KRW20 trillion, (b) corporate bond and commercial paper (CP) purchase program of up to KRW10 trillion, (c) primary collateralized bond obligation (P-CBO) support program of up to KRW2.8 trillion, (d) project finance asset-backed commercial paper (PF-ABCP) purchase program of up to KRW1.8 trillion, and (e) liquidity support of up to KRW3 trillion made available for securities firms by the Korea Securities Finance Corporation.

The government, related organizations, and the financial sectors also plan to continue to operate the real estate project finance market support programs worth up to KRW53.7 trillion that are currently in place to facilitate a soft-landing in the real estate project finance market. The support programs include the following—(a) project finance loan guarantee program of up to KRW35 trillion, (b) project finance normalization support fund of up to KRW2.7 trillion, (c) loan guarantees for unsubscribed housing units of up to KRW5 trillion, (d) banking and insurance sectors’ syndicated loans of up to KRW1 trillion, and (e) guarantee support for non-housing and non-apartment projects of up to KRW10 trillion.

Temporary Easing of Regulations on Real Estate Project Finance Market

At the meeting, Vice Chairman Kim also announced plans to extend the period of the temporarily eased regulations currently in place to facilitate a soft-landing in the real estate project finance market. As the restructuring and liquidation of real estate development projects are currently taking place, the availability of the temporarily eased regulations, which is set to expire at the end of 2024, will be extended until June 2025, with specific plans for normalization expected to be determined in the first half of 2025 after considering market conditions.

In this regard, Vice Chairman Kim said that financial authorities are regularly monitoring the reserve situation of financial companies and that authorities will continue to encourage financial companies to bolster their capital levels to prevent contagion of risks from the nonbanking sector in the process of pursuing the restructuring and liquidation of unviable real estate development projects.

To make sure a seamless soft-landing in the real estate project finance market, Vice Chairman Kim called for more responsible handling by financial companies and said that if it becomes necessary, authorities will work to promptly come up with additional support measures in close coordination with related organizations.

• Please refer to the attached PDF for details.

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