Domestic Financial Companies Face Crisis from 2 Trillion Won in Troubled Overseas Real Estate Investments

In South Korea, approximately 2.1 trillion won worth of overseas real estate investment projects by financial companies face default risks. According to data released by the Financial Supervisory Service, as of the end of September last year, about 2.06 trillion won of investments in individual overseas projects experienced events of loss of maturity benefits (EOD).

Loss of maturity benefits (EOD) refers to the situation where, due to a decline in the debtor’s creditworthiness, financial institutions can recover their loans before maturity. This indicates a reduced likelihood of loan recovery by financial institutions and carries the risk of potential losses. Recently, as some projects’ EOD events have been解除, the amount of bad debt has decreased by 10 billion won compared to the previous quarter.

Currently, the total balance of alternative overseas real estate investments in the financial sector has reached 55.1 trillion won, an increase of 6 trillion won from the previous quarter. By industry, insurance companies hold the largest share at 30.8 trillion won, followed by banks, securities firms, and mutual finance institutions.

The Financial Supervisory Service believes that since 2023, the overall overseas real estate market has shown signs of improvement, and the investment scale of the financial industry accounts for less than 1% of total assets, indicating no systemic major risks. However, due to rising interest rates caused by Middle East tensions and uncertainties in the real estate market outlook, additional risks are being closely monitored.

In addition, to strengthen risk management of overseas alternative investments by financial companies, plans are underway to revise relevant model guidelines in the first half of this year. These changes will serve as an important foundation for ensuring the stability of the financial market and the soundness of overseas investments in the future.