Support for Credit Recovery

The government has decided that those registered as credit defaulters at the Korean Federation of Banks (KFB) as of March 10 will be supported with a bad bank credit recovery program after its establishment in May to recover their credit.

Among these defaulters, those with a debt under 50 million won based on the principal at two or more financial companies with a six month or more delay can receive support from the program. From this, it is estimated that some 1.8 million defaulters will benefit from this support.

The bad bank establishment committee is formed of financial institutions including Kookmin Bank, the Korea Asset Management Corporation and the Korean Federation of Banks announced yesterday a bad bank management plan including these matters.

The KFB’s managing director Kang Bong-hee said, “Since the government announced the bad bank establishment plans on March 10, we decided to relieve first those who we registered as credit defaulters before that day.”

With its establishment in May, the bad bank will receive applications from those affected for three months, and start in full-scale its credit recovery program.

Yong Won-young, managing director of LG Investment & Securities, the consulting company for the establishment of the bad bank program, said, “The debtor will relieved from his or her position as a credit defaulter when paying 3 percent of the principal. The banks will loan the other 97 percent, and the debtor will pay back in eight years at most with five to six percent annual interest.”

However, the bad bank will give benefits such as reducing the interest to those who pay off in earnest, and will deprive benefits if the principal redeemed is overdue three months or longer.

Suk-Ho Shin kyle@donga.com