The financial watchdog said Thursday it has advised real estate investment trusts to set aside sufficient reserves against bad assets under a worst-case scenario.
In a meeting with the heads of 13 REITs, the Financial Supervisory Service called on them to enhance their financial soundness by strictly managing potentially-risky real estate development projects as the real estate market still remains unstable.
The watchdog also said REITs should redouble their efforts to secure additional capital as strict rules on their capital base are set to take effect in July.
The FSS' call came as the country needs to accelerate the resolution of shaky construction projects amid still higher market rates.
The watchdog had expressed woes that there has been a slowdown in sorting out and restructuring bad loans tied to real estate development projects.
According to the financial watchdog, some 5.2 trillion won ($3.62 billion) worth of project financing had been written off or recapitalized as of mid-December.
Financial companies' exposure to feeble construction development projects was tallied at 12.5 trillion won, 8.8 trillion won of which will be restructured or recapitalized, according to the FSS. (Yonhap)
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