South Korean Bad Bank Agrees to Sell $615 Million in Delinquent Debt After Presidential Criticism
Sangnoksu Jeil Securitization Specialty Co., a private distressed-debt management company established after South Korea’s 2003 credit card crisis, has agreed to sell approximately 845 billion won ($615 million) in long-term delinquent debt to the government-supported New Leap Fund after criticism from President Lee Jae Myung.
The decision came shortly after Lee publicly condemned what he described as “primitive predatory finance” and questioned why financial authorities had failed to address collection practices tied to decades-old consumer debt.
According to South Korean financial authorities, the debt sale will target obligations of 50 million won or less that have remained delinquent for more than seven years. Officials said the transfer to the New Leap Fund will proceed “in the shortest possible time.”
The Financial Services Commission (FSC) said approximately 110,000 borrowers are expected to benefit from the move through relief from collection activity and long-term debt obligations.
FSC Secretary General Shin Jin-chang convened an emergency meeting on May 12 with Sangnoksu’s nine participating financial firms at the Seoul Government Complex to finalize the plan.
Authorities also announced that debts not eligible for transfer to the New Leap Fund would instead be sold to the Korea Asset Management Corporation (KAMCO) as quickly as possible.
The FSC further stated it will launch a full investigation into securitization firms holding similar long-term delinquent debt portfolios. Regulators also plan to continue pressuring lenders and asset holders to participate in the government’s debt relief initiative.
Sangnoksu was originally created to dispose of non-performing loans generated during South Korea’s credit card crisis more than two decades ago. The entity has managed and pursued recovery on long-term distressed debt portfolios for more than two decades.
The FSC reportedly had been attempting since earlier this year to persuade Sangnoksu to participate in the New Leap Fund, but discussions had progressed slowly before Lee’s public criticism was followed by a rapid agreement.
During a Cabinet meeting and emergency economic review session, Lee criticized firms connected to the crisis-era debt market for continuing aggressive collection efforts after financial institutions themselves previously received government support.
During the meeting, Lee also criticized financial regulators for failing to intervene earlier.
“Why have the authorities in charge failed even to detect such irregularities?” Lee said, according to local reports.
The developments reflect growing political and regulatory pressure in South Korea surrounding legacy debt portfolios, consumer debt relief, and the role private distressed-debt investors and securitization firms play in long-term collection activity.
