Seoul: The South Korean government is set to introduce a debt restructuring scheme for individuals in October, aiming to alleviate their payment burdens, as announced by the country's financial regulator on Friday. The initiative involves the creation of a "bad bank," a dedicated vehicle for debt restructuring, which will be valued at 800 billion won (approximately US$581 million). Half of this amount will be financed by banks and other financial institutions, with the remaining portion covered by the government.
According to Yonhap News Agency, the Financial Services Commission (FSC) revealed that the bad bank will assume or restructure portions of debts owed by individuals facing difficulties in meeting their payment obligations. The FSC emphasized the importance of implementing measures to prevent moral hazard among borrowers as part of the scheme.
The plan includes provisions for the bad bank to take over certain bad loans or offer borrowers flexible repayment options. The regulator projects that the debt restructuring initiative will address about 16.4 trillion won in overdue loans, impacting roughly 1.13 million borrowers who have struggled with repayments for years.