Collaborative Debt Guarantee, is it abolished?

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Hi, guys. I wonder how you guys are spending your winter vacation. I guess some of you are studying, while some others leave for a nice holiday to take a rest. Well, whatever you are doing for winter break, I hope all of you are doing something meaningful that you have kept in your mind. Let us begin today’s topic, then.

 

Today’s topic is about the issue of ‘collaborative debt guarantee’. Financial Services Commission (FSC) abolished collaborative debt guarantee in last May in order to prevent a series of bankruptcies experienced by small businesses and individuals. Since its policy implementation has been effective for more than half a year, it is now time for FSC to start inspecting and evaluating how the policy has fulfilled its expected outcomes.

 

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First, let’s check up some main parts of the policy. Collaborative debt guarantee was abolished in principle, with regards to individual businesses’ mortgage loans and personal loans. In case of multiple joint sureties, each joint surety shares burdens by dividing the total debt. Overall, collaborative debt guarantees show a decreasing trend in size, representing that FSC’s policy measure is carried out as it is meant to be. Partially, there still remain some exceptional cases. That is, some of the newly approved loans, by Korea Credit Guarantee Fund and Korea Technology Fund Corporation, are involved with collaborative debt guarantee. However, those exceptional cases of collaborative debt guarantees are substantially decreasing, as well as the total size of collaborative guarantees is being downsized.

 

Let me give you some figures showing how collaborative debt guarantees have been reduced. For guarantees by Korea Credit Guarantee Fund, the rate of reduction was at about 14.8%. For other guarantees by Korea Technology Finance Corporation, the rate showed 19.9%. Both of figures illustrate that the abolishment of collaborative debt guarantees is working in accordance with its plan.

 

FSC announced that it will periodically check up whether the abolishment of the collaborative debt guarantee is working properly. For the purpose of enhancing small-sized companies’ liabilities, FSC will run on-spot inspection thoroughly. Lastly, to complement the current policy measure, it is planned to cut back the tolerance band for exiting partial exceptions to collaborative debt guarantees.

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