The South Korea Financial Services Commission finalized the implementation of project finance equity ratio rules announced in its August housing finance package, deferring their application to residential projects for two years to support housing funding. Residential projects will become subject to a 5% threshold in 2029, rising by 5 percentage points annually to 20% from 2032. Nonresidential projects, which have higher default rates, will remain subject to the rules from 2027 as planned. The framework will incorporate equity ratios into quarterly viability assessments and related provisioning, extend equity based lending conditions from savings banks to other smaller financial sectors, and adjust risk weights. Banks and securities firms may receive lower risk weights for qualifying residential projects at a 5% threshold in 2027 and 2028, before the broader residential schedule begins. The commission also reported that total PF exposure declined by KRW 1 trillion in the second quarter to KRW 168.8 trillion, although the pace of contraction slowed. PF loans rose for the first time since the end of 2023 to KRW 115.8 trillion, with KRW 23.5 trillion of new lending during the quarter, while the delinquency rate eased to 4.56%. Watchlist and at risk exposures fell to KRW 15.1 trillion, or 9% of total exposure, and KRW 19.7 trillion of such projects had been resolved or restructured by the end of June. Authorities will continue targeted oversight of 279 residential sites and implement expanded guarantees, a KRW 3 trillion Korea Asset Management Corporation fund and additional industry restructuring funds.

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