South Korea Financial Supervisory Service reports KRW54.5 trillion overseas real estate exposure and steps up monitoring of loss recognition and valuations

The South Korea Financial Supervisory Service published an end-June 2025 snapshot of Korean financial companies’ alternative investments in overseas real estate, showing an outstanding balance of KRW54.5 trillion, down KRW1.0 trillion from three months earlier, and set out supervisory follow-up focused on loss recognition, appraisals and risk management. Overseas real estate investment equalled 0.7% of total financial-sector assets (KRW7,488.3 trillion). Insurance companies accounted for the largest share at KRW30.4 trillion (55.7%), followed by banks at KRW11.4 trillion (21.0%) and securities companies at KRW7.3 trillion (13.4%). By region, 61.6% of exposure was in North America (KRW33.6 trillion) and 18.7% in Europe (KRW10.2 trillion), with Asia at 6.4% and other or multi-region investments at 13.4%. The FSS estimated 7.8% of investments (KRW4.3 trillion) are scheduled to mature in 2025 and 69.2% (KRW37.7 trillion) by 2030; investment in individual properties totalled KRW31.6 trillion, of which 6.56% (KRW2.07 trillion) was exposed to events of default, while the volume of EOD declined quarter-on-quarter as firms preemptively recognised losses. The FSS noted improving sentiment and a recovery trajectory in overseas property markets but highlighted ongoing vacancy and potential price-correction risks, particularly in office investments. It plans continuous monitoring, checks on whether firms are taking appropriate loss-recognition measures for high-risk properties, timely appraisals and assessments, and work to improve regulations on financial companies’ risk management and internal controls.