[Background]
□ Existing soundness regulations such as the Net Capital Ratio (NCR) tend to be lagging indicators, making it difficult to implement preventive measures (“proactive management systems”) to ensure that land trust projects are undertaken within the trust companies’ management capacity.

ㅇ In addition, while securities firms are subject to a cap of 100% on real estate-related guarantees relative to their equity capital, there has been a regulatory gap concerning real estate trust companies.

→ As part of the joint government Real Estate Project Financing (PF) System Improvement Plan (announced in November 2024), a plan to strengthen the financial soundness of land trusts operated by real estate trust companies was introduced. As a follow-up measure, a limit on land trust risk exposure relative to equity capital has been established.

[Regulation Details]
□ A new regulatory limit is introduced that caps the total expected risk exposure from land trust projects at 100% of the trust company’s equity capital.
ㅇ To ensure a smooth market transition, the regulation will be phased in: 150% by the end of 2025, 120% by the end of 2026, and 100% by the end of 2027.
ㅇ Cases where the limit is exceeded will be subject to further regulatory oversight.