The South Korea Financial Services Commission and Financial Supervisory Service enacted revised rules that condition bad debt recognition for smaller unsecured personal delinquent claims on allowing the statutory limitation period to expire at its initially scheduled date or relinquishing the claim if the period has been extended. The framework applies to claims of up to KRW 50 million for banks and insurers and up to KRW 30 million for savings banks, specialized credit finance companies and other covered firms. It replaces routine extensions with a principle of expiry, subject to limited exceptions such as the discovery of concealed assets, legally required interruptions during bankruptcy or rehabilitation proceedings, and ongoing debt adjustments. If a covered claim is sold, the sale agreement must specify the scheduled expiry date and the obligation to allow expiry, while the originating firm must monitor and report on the purchaser’s compliance. Revised sector standards also establish management procedures and require extended claims to be reassessed, including a review of the borrower’s repayment capacity three years after an extension and possible early relinquishment where repayment capacity is absent. The framework applies from firms’ bad debt recognition applications for the fourth quarter of 2026. Industry associations will also publish institution-level data for the first half of 2026 covering claim relinquishments, debt adjustments and debt sales, with disclosures to continue every six months.
South Korea Financial Services Commission introduces conditional bad debt recognition for smaller personal delinquent claims
The South Korea Financial Services Commission and Financial Supervisory Service introduced conditional bad debt recognition for smaller unsecured personal delinquent claims, generally requiring firms to allow the limitation period to expire rather than repeatedly extend it. The rules cover claims of up to KRW 50 million for banks and insurers and KRW 30 million for savings banks, specialized credit finance companies and other covered firms, with limited exceptions. They apply from fourth-quarter 2026 applications and include purchaser compliance duties and reviews of extended claims.