The delay in bond purchases by the New Leap Fund, which marks its first anniversary, was a key topic during a National Assembly audit. Only half of the major companies in the lending sector, which hold about 30% of the total target bonds, have participated in the agreement. Jeong Jeong-hoon, president of the Korea Asset Management Corporation (KAMCO), stated that discussions with the lending sector will continue.
During the National Assembly's audit of KAMCO, the Korea Housing Finance Corporation, and the Credit Guarantee Fund held in Busan on October 15, Democratic Party lawmaker Kang Jun-hyun questioned the bond purchase and incineration performance of the New Leap Fund and asked about future plans.
Kang noted, "The purchase amount is approximately 11.7 trillion won, and the incineration performance is about 3.8 trillion won," and requested details on future purchase and incineration plans.
In response, Jeong said, "Except for the lending sector, we plan to complete the full purchase as originally scheduled by the end of October," adding that only about 50% of the lending sector has joined the agreement and that they will finalize it through ongoing discussions.
Launched in October 2022, the New Leap Fund is a program designed to purchase debts of 50 million won or less that have been overdue for more than seven years, either incinerating or adjusting them based on repayment ability. The initial plan was to complete the purchase of target bonds by the end of this month, but as of now, the amount purchased stands at 11.7 trillion won, or 71.3% of the target of 16.4 trillion won.
The key to future bond purchases lies in the participation of the lending sector. Currently, only 15 out of the top 30 lending companies have joined the agreement. Lending companies typically purchase non-performing loans at 20-30% of face value, but they must sell to the New Leap Fund at around 5%, which reduces their incentive to participate. Financial authorities are considering incentive measures to encourage broader participation.
Concerns have also been raised regarding the PF Normalization Fund, which may place the burden of losses on public funds. Democratic Party lawmaker Lee Kang-il pointed out that among the 15 projects where the fund acquired senior bonds, 11 have allowed existing creditors to recover their principal, questioning the fairness of the loss-sharing structure. In a fund where both public and private capital contribute 1.5 trillion won each, if public funds are injected as subordinate capital, the loss burden could disproportionately fall on the public sector.
Jeong promised to verify bond purchase prices and establish loss-sharing criteria.
Meanwhile, the DIP financing, which provides funds to rehabilitated companies, has seen a significant increase in defaults alongside expanded support. The amount of support rose from 38.3 billion won in 2022 to 93.4 billion won last year, nearly 2.4 times. During the same period, the overdue principal due to loss of benefits surged from 1.7 billion won to 3.2 billion won, a nearly 19-fold increase, reaching 36.7 billion won by July of this year. The audit highlighted the need for strengthened review and post-management.
Issues regarding delays in housing pension payments were also raised during the audit of the Housing Finance Corporation. Of the 13,889 housing pension loans executed from January to September this year, 552 cases exceeded the internal processing deadline of one month for guarantee reviews. Additionally, there were 4,631 cases where it took more than a week from the issuance of the guarantee to the execution of the loan by the bank.
* This article has been translated by AI.
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