South Korea’s top financial regulator prodded banking group chiefs Monday to provide financial support to liquidity-squeezed builders reeling from a prolonged property market slump.
The call came as a bunch of builders, including Sambu Construction Co., applied for court receivership after failing to repay loans borrowed to finance their construction projects. Major local banks have been blamed for aggravating builders’ troubles by refusing to roll over maturing loans or forcing them to repay their loans.
“As seen in the case of Sambu Construction, the financial sector’s response to builders’ project financing (PF) loan issues has been passive,” Financial Services Commission (FSC) Chairman Kim Seok-dong said at a breakfast meeting with chairmen of five local financial groups. “And that is feared to trigger difficulties on builders’ business management.”
KB Financial Group Inc. Chairman Euh Yoon-dae, KDB Financial Group Inc. Chairman Kang Man-soo and three other heads from Woori Finance Holdings Co., Hana Financial Group Inc. and Shinhan Financial Group Co. attended the meeting.
“Financial holdings companies play a critical role in leading the industrial sector and the financial market … and recently a concern has been raised over whether they provide appropriate and effective financial support to economic activities,” Chairman Kim said.