Connect to share and comment
SEOUL, March 11 (Yonhap) -- The South Korean government is moving to launch a public fund designed to help delinquent borrowers reschedule their debts as part of a broader move by President Park Geun-hye to tackle the country's mounting household debts.
The Financial Services Commission (FSC), the financial regulator, plans to launch a debt-rescheduling fund worth an initial capital of 870 billion won (US$798.5 million) as early as the end of this month, according to its officials.
Dubbed by the government as the "People's Happiness Fund," the envisioned fund has been one of the key policy pledges that President Park vowed to offer during her presidential campaign as a way to ease the financial burdens among the lower-income group with overdue debts.
Under the plan, the fund will buy overdue debts owned by local financial companies that are worth less than a combined 100 million won and at least more than six months behind their principal repayment, the FSC said.
The fund will take over such assets held by all financial firms in Korea, whether in the banking or non-banking sector, according to the regulator.
Those whose debts have turned overdue as of the end of August 2012 or before that will be eligible to apply for the debt rescheduling program, it added.
It is widely expected that the fund will buy such debts from financial firms at a discount rate of 4-8 percent, with ways as to how to return the proceeds recouped from the debts to them still being discussed.
Given the initial capital and the discount rate, the FSC estimated the fund will be able to write off about 50-70 percent of the principals and settle overdue debts worth a total of 22 trillion won at most.
South Korea's household debt reached a record 959.4 trillion won ($997.2 billion) as of the end of December last year, according to the central bank, further spawning concerns over massive defaults amid the slowing economy.
Considering the degree of priority and public demand, the FSC said it is moving to set up the fund first, with the process of revising related laws to provide necessary legal grounds to follow shortly after the launch, according to the regulator.
All rights reserved by Yonhap News Agency