Asset Screening to Be Strengthened for Saechulbal Fund Debt Adjustment... Lower Reduction Rates for High Repayment Capacity Debtors

FSC and KAMCO to Include Virtual Assets and Unlisted Stocks in Asset Screening
Thorough Investigation of Asset Concealment and Fraudulent Transfers Before Application

Going forward, the asset screening process for small business owners and self-employed individuals applying for debt adjustment through the Saechulbal Fund will be further strengthened. Authorities will thoroughly investigate whether there has been any intentional reduction of assets, such as through gifts or disposal prior to the application. For debtors with higher repayment capacity, the principal reduction rate will also be lowered.

Yonhap News Agency

On June 25, the Financial Services Commission announced that it held a work status review meeting with Korea Asset Management Corporation (KAMCO) to discuss the current operations of the Saechulbal Fund and plans to improve asset screening and reduction standards.

The Saechulbal Fund, operated by KAMCO, supports debt adjustment for small business owners and self-employed individuals. However, some cases have been found to be inconsistent with the fund's purpose, such as when individuals with significant investment assets receive high reduction rates compared to their repayment capacity. As a result, the authorities are pursuing improvements to the system. The Financial Services Commission will supplement the asset screening process, reduction standards, and debt management system throughout all stages of debt adjustment.

First, asset screening will be strengthened. In the past, the review focused on financial assets submitted by applicants and verifiable information—such as income, real estate, and movable property—available through the Administrative Information Sharing Network. However, since the beginning of this year, the process has been enhanced to include checks on virtual assets and unlisted stocks, reflecting these as part of the asset review.

The criteria for debt reduction will also be adjusted. Currently, for unsecured non-performing loans delinquent for more than 90 days, the debtor can have 60–80% of the principal reduced depending on their repayment capacity. However, with the minimum reduction rate set at 60%, critics have pointed out that the differentiation according to repayment ability is not significant. Therefore, going forward, for debtors with high repayment capacity—such as those whose repayment rate exceeds 100%—the minimum reduction rate will be lowered from 60% to 30%. The standard will be adjusted so that the higher the repayment capacity, the lower the reduction rate, by 5–30 percentage points, with a minimum applied rate of 30%.

Debtor investigations and post-management will also be further strengthened. Since February of this year, KAMCO has operated a dedicated asset investigation team to check for cases where real estate or pre-sale rights were gifted or sold prior to a debt adjustment application to deliberately reduce assets. Notably, with the revised Credit Information Act set to take effect in August, authorities will be able to access a broader range of information necessary for asset investigations, such as prior gifts, enabling more thorough reviews. If investigations uncover suspected fraudulent acts, the agreement can be terminated, assets can be re-reflected, and debt adjustment agreements can be renegotiated or debt collection measures can be taken.

The Financial Services Commission and KAMCO plan to promptly implement these system improvements in consultation with related parties, including financial institutions that have signed cooperation agreements.

An official from the Financial Services Commission stated, "This system reform is not intended to reduce support from the Saechulbal Fund, but rather to prevent unnecessary resource waste and ensure that support reaches the debtors who truly need it. We expect that it will help enhance the effectiveness and fairness of the public debt adjustment system and strengthen the sustainability of inclusive finance policies."

This content was produced with the assistance of AI translation services.