Invest1 publisher3 min readPublished
Korea Credit Guarantee Fund kept approving broker-linked guarantees for nine months after the raid
Police searched the fund in March last year over forged guarantee documents. It approved 5.795 billion won more for ten companies tied to a second broker before special post-management measures began in December.
The Investor · Invest desk
What happened
- Data from the Korea Credit Guarantee Fund puts 554 broker-linked companies under investigation, holding 399.625 billion won of approved guarantees between them.
- Police searched the fund's offices twice last year, in March and again in December, securing records on 272 companies and then on 82.
- The fund carried on approving startup guarantees without an internal audit after the March search, and began special post-management measures only in December.
- Inside that window it approved guarantees worth 5.795 billion won for ten companies linked to a second loan broker, identified as B.
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Why it matters
- exposure Every guarantee in the 399.625 billion won pool is a claim the fund must settle with the lender if the borrower stops paying, and three companies have reached that point.
- constraint A licensed founder in a category the fund now flags for broker risk can guarantee 500 million won, half the program ceiling, whether or not a broker ever touched the file.
- decision Having said it cannot identify broker-linked applicants one by one at screening, the fund has moved its control to limit-setting, where the constraint binds every applicant equally.
- contradiction The fund places the post-raid approvals inside the transition period of its own overhaul; Song called the same nine months mechanical approvals.
Ten companies and 5.795 billion won of guarantees averages 579.5 million won each [1]. At the time of the fraud, a guarantee certificate of 500 million won or more required the applicant to show equity capital of at least 500 million won [6], and the proof of that equity was a bank balance certificate. Bank balance certificates and medical equipment purchase contracts are the two document types broker A forged [7].
Police secured records on 272 companies in the March search and 82 in December [10], then went after 200 more companies linked to broker B in April this year [11]. Those three tranches add to 554, the exact number of broker-linked companies now under investigation [2].
Against the 399.625 billion won of guarantees approved for those 554 companies [1], the 5.795 billion written after the March search is 1.45% [3]. The other 393.83 billion was approved before any raid [4]. That works out to 721 million won per company, against a program cap of 1 billion won for a licensed founder [7][5].
The fund has paid 1.01176 billion won to lenders on behalf of three of the 554 [13], an average of 337.25 million won each [5] and 0.25% of the cohort's face value [6]. The data submitted to Rep. Song Eon-seog does not say how many of the remaining companies have stopped paying [2]. Run the three-company average across all 554 and you get about 186.8 billion won [8]. That is only arithmetic: a guarantee under investigation is not a guarantee in default, and the obligation only crystallises when a borrower fails to repay [12].
By the fund's account, the post-raid approvals fell inside the transition period of an overhaul it carried out last year [14]. "It is realistically difficult to determine one by one which companies are linked to loan brokers during the guarantee screening process," a fund official said [15]. The answer it reached is a lower ceiling. For business categories with a high likelihood of broker involvement the limit is now 500 million won, half the program cap [16][9], and limits are calculated from projected revenue after startup instead of the size of the borrower's own funds [16].
Song said: "Continuing mechanical guarantee approvals without a separate inspection and launching special post-management only nine months later is complacent fund management." [17]
The nine months are the governance failure and the money inside them is 5.795 billion won [4]. That is the cheap part. I would put the harder question on the 393.83 billion won approved earlier [4], screened by staff who treated A's presence at more than 60 consultations and on-site inspections as ordinary loan consulting work [8][9]. If subrogation across the 554 stays near 0.25% [6], this cost the fund roughly a billion won and a committee hearing. If the three paid-out companies are the leading edge, a lower limit does nothing for the book already written.
What to watch
- Any disclosure of how many of the 554 guarantees are still outstanding rather than repaid. That number is the only way to size the loss.
- Whether Song's National Policy Committee pursues the March-to-December gap in hearings, and whether fund staff face charges.
- Whether the projected-revenue basis produces higher or lower ceilings for legitimate clinic founders than the old equity test did.