By Kim Tae-jong
The recovery rate of public funds spent by the government to bail out firms during the 1997-1998 financial crisis has only showed a 1 percentage point gain last year, largely due to slowing economic conditions and delays in repayment by major beneficiaries, the nation’s financial regulator said Friday.
According to the Financial Services Commission (FSC), the government has recouped around 102.6 trillion won ($92 billion) in public funds as of last December, marking a 60.9 percent recovery rate.
A total of 168.6 trillion won in public funds was injected to bail out financial firms during the Asian financial crisis.
But the recovery rate has stagnated, marking only a 1 percentage point gain last year from 59.9 percent the year before that.
Previously, the rate had been gradually increasing achieving 57 percent in 2009, 55.4 percent in 2008 and 53.4 percent in 2007 and 50.2 percent in 2006.
“The recovery rate will not sharply improve for a while as it is hard to recoup bailout funds from major firms such as Woori Investment & Securities,” said Kim Seok-hwan, an official from the FSC. “The low gain in the recovery rate is also due to poorer economic conditions.”
The government poured massive amounts of taxpayer money into troubled financial institutions to rescue them from bankruptcy when the financial crisis erupted in late 1997.
It is necessary for the government to pay off all public funds by the end of 2027.
Separately, the government also has retrieved 1.62 trillion won, or 26.1 percent, of a total of 6.2 trillion won from another public fund, which was used to stabilize the financial market in the aftermath of the 2008 global financial crisis and assist the restructuring of financial firms.
The government now manages two tranches of public funds. The latter was created in 2009 in a bid to bolster the health of the local finance sector by helping buying out soured loans and assets of bankrupt firms.
“The recovery rate of the second public fund will improve quickly as the repayment time is due in the latter half of the year,” Kim said.