Financial Services Commission orders Mugunghwa Trust to improve management… First imposed on PF insolvency

Financial authorities issued‌ a management improvement order, the highest‍ level of timely ⁢corrective action, ⁣to Mugunghwa Trust,⁤ ranked ‌6th⁢ in the real estate trust industry. This is the first time timely corrective action has ⁤been imposed in relation ‍to the aftermath of real estate project ⁣financing ⁣(PF)⁤ insolvency that has continued since the‌ second⁣ half of ‌2022‌ (July-December).

The ‍Financial Services Commission announced that it held a ‍regular meeting on the afternoon of the ⁢27th and decided to impose a management improvement order on ⁢Mugunghwa Trust.⁢ A ⁢management ⁤improvement order is the highest ‌level of warning among the management improvement measures taken ⁢by ​financial authorities ⁢to financial companies whose financial soundness has⁣ deteriorated and do not meet certain standards.
In accordance ​with​ the Financial Services Commission’s management improvement⁤ order, Mugunghwa‌ Trust ⁢must normalize itself, such as paid-in capital‌ increase, pursue third-party acquisitions after objective due diligence, and ⁢submit a management improvement plan that reflects these by ‌January 24th of ‌next‌ year. ‍

As a result of the ‌Financial Supervisory ‍Service’s inspection, as ​of the ​end of September,⁣ Mugunghwa Trust’s net capital ratio (NCR) ⁣was 69%, which was below the 100%‌ standard for management improvement ‌orders. This is the result of correcting the reclassification of asset quality and understatement⁣ of market risk in the NCR 125% announced by Mugunghwa Trust. If the NCR falls below 150%, a management improvement ‍recommendation is issued, if it falls below 120%, a management improvement request is issued, ⁢and if it falls below 100%, a management improvement order is issued.

⁤Financial ‌authorities believe that the normalization of‌ Rose of Sharon Trust will have limited impact‍ on the real⁤ estate PF business promoted⁣ as a trust business because the real estate trust company’s‍ unique accounts and trust assets are ⁣insulated from bankruptcy, which is a device to protect investors. ⁤

The⁣ financial world is interpreting this measure as a‌ de facto sale. Kwon ​Dae-young,​ Secretary-General of the Financial Services⁣ Commission, said, “We expect Mugunghwa Trust to prepare a third-party⁤ sale plan.”

#HibiscusTrust#PF insolvency

Reporter Jeon Joo-young [email protected]

• great

  0dog

• I’m sad

  0dog

• I’m‌ angry

  0dog

Hot news now

• great

  0dog

• ‌ ⁣ ⁤ <button class="ib_btn sad " data-event_name="click

• I’m angry

  0dog

• 
  

  
  0
  

How can Mugunghwa Trust improve its net capital ratio (NCR) to meet ‌regulatory standards?

Based on the ⁣information provided, it appears‌ that Mugunghwa Trust is facing scrutiny from the Financial Supervisory Service due to a low net capital ratio (NCR) of⁣ 69% as ​of the end⁢ of September, which is below the acceptable ⁤threshold of 100%. ‍This situation has prompted discussions regarding management improvement measures and potential implications for the trust’s ‌operations, particularly in relation to⁢ the real estate⁣ project finance (PF) ⁣sector.

To address this issue⁣ effectively by January 24th of next year, a ⁣strategic plan could ‌be formulated with the following ​key ⁤components:

Strategic Plan for Mugunghwa Trust

1. Assessment and Analysis

• Conduct a thorough internal audit: Evaluate the factors contributing‌ to the low​ NCR, including asset quality reclassification and​ market risk⁣ understatements.
• Seek ​external expertise: Consider‌ hiring financial ​consultants to provide an objective review of current financial practices and​ risk assessment strategies.

2. Financial Restructuring

• Develop a capital⁤ enhancement plan: Explore avenues for improving the NCR, such as raising additional capital through equity issuance, securing short-term financing, or restructuring existing liabilities.
• Asset Management Optimization:‍ Enhance the asset quality by reviewing and possibly disposing of non-performing assets to increase the overall asset base ‌and reduce risks.

3. Risk Management and Compliance

• Strengthen risk management frameworks: ‍Implement more robust⁢ risk management protocols​ to ensure compliance ‌with regulatory standards and to mitigate potential future ⁢risks.
• Regular Monitoring: Establish a system for ​ongoing monitoring of the NCR and other key financial indicators to ⁢catch potential issues early.

4. Stakeholder Engagement

• Prepare for communication with stakeholders:‌ Design a communication strategy to ⁢keep stakeholders informed about⁣ the measures being taken to improve the financial situation and explain the rationale⁣ behind any asset ‌sales or restructuring ‌plans.
• Engage with investors: Schedule ⁤meetings or releases to assure investors of the measures being implemented and how these will protect⁢ their interests.

5. Compliance with Regulatory ⁤Requirements

• Develop⁤ a⁤ compliance strategy: ‍Prepare⁤ to meet the regulatory requirements set by‍ the​ Financial Supervisory Service, including achieving a minimum NCR ​and submitting a comprehensive management improvement plan.
• Third-party sale preparations: If a third-party ⁤sale is warranted, begin⁢ identifying potential buyers and evaluating the trust’s most viable assets for⁢ sale.

6. Timeline and Milestones

• Immediate Actions by December: Complete the internal audit, initiate the⁢ capital enhancement plan, and start engaging with external experts.
• Mid-January Review: Assess progress on ⁤asset ‌management and restructuring ⁢efforts.
• Pre-January 24 Submission: ‌Finalize and submit the management⁢ improvement plan to the Financial Supervisory Service before the deadline.

Conclusion

The above plan is structured to ⁢address the regulatory challenges faced by Mugunghwa Trust, ensure compliance,‍ and stabilize‌ its financial footing. Regular updates and adjustments to the plan will be necessary as circumstances evolve. Engaging stakeholders throughout ​the process will be critical in maintaining​ trust and confidence in the leadership’s direction.