The Bank of Korea headquarters in Seoul (Image courtesy of Yonhap)
SEOUL, Jun. 26 (Korea Bizwire) — The Bank of Korea (BOK) said Wednesday that risks on short-term financing to construction projects have grown due to a slump in property markets and rising costs of construction materials.
In a report, the BOK said the total value of outstanding short-term loans to finance construction projects, called project financing (PF) loans in South Korea, stood at 134.2 trillion won (US$96.2 billion) at the end of March.
The delinquency ratio on PF loans came to 3.55 percent as of end-March, up 0.85 percentage point from three months earlier, according to the report.
In particular, the delinquency ratio on PF loans for brokerages stood at 17.6 percent and that for savings banks was 11.3 percent.
The BOK said liquidity risks on securities firms are likely to expand if “unexpected external shocks” hit short-term financing markets.
PF loans have become a major risk factor in the financial sector amid a prolonged slump in the property market due to price hikes.
Taeyoung Engineering & Construction, the country’s 16th-largest builder, was forced to apply for a debt restructuring program in December last year after it faced a liquidity shortage due to PF loans.
Financial authorities have taken steps to help make a soft landing for such risky PF-related loans.
(Yonhap)
