(1) Reasons for Proposal

This Partial Amendment aims to reflect the improvements* that tighten regulations for soundness in financial investment business entities’ exposure to real property in Regulations on Financial Investment Business. 

* Measures for Real Property Project Financing (PF) Exposure Soundness Management (5 Dec 2019)

(2) Major Provisions

A. Create a regulation that newly defines “real property debt guarantee ratio” (subparagraph 19-2 of Article 3-6)

Define “real property debt guarantee ratio” as the ratio of a financial investment business entity’s real property debt guarantee to its equity capital, and reflect 100% of the amount of the entity’s debt guarantee for domestic residential real property in the ratio

* The percentage of the guaranteed amount reflected in calculating the real property debt guarantee ratio (to be reflected in the Detailed Enforcement Rule)

① Debt guarantee for domestic residential real property: Reflect 100% of the guaranteed amount

② Debt guarantee for domestic commercial real property: Reflect 50% of the guaranteed amount

③ Debt guarantee for overseas residential and commercial real property: Reflect 50% of the guaranteed amount

④ Debt guarantee for domestic and overseas social overhead capital (SOC): Reflect none

B. Tighten regulations on net capital ratio (NCR) for comprehensive financial investment business entities (Articles 3-14 (1) 4 (g))

Exclude credit offering to an entity related to domestic real property from items recognized as exceptions under deduction items in calculating a comprehensive financial investment business entity’s net operating capital

C. Set a limit on real property debt guarantee (Articles 3-24-5)

Require a class 1 financial investment business entity to maintain its real property debt guarantee ratio below 100 out of 100

* Transitional measure: (From the Regulations’ effective date to 31 Dec 2020) maintain no more than 120 out of 100, and (from 1 Jan 2021 to 30 Jun 2021) maintain no more than 110 out of 100