South Korean financial regulators will finalize guidelines encouraging commercial banks to support orders for mid-sized shipbuilders in a review committee in early May 2025, financial industry sources said on Monday.

The guidelines, jointly prepared by the country’s five major commercial banks- KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank - stipulate that banks would not be held liable for losses if financial support is provided under specific conditions. The conditions include the use of escrow accounts for customer advance payments, successful financial stability assessments, and third-party certification of ship profitability.

The move seeks to boost the issuance of refund guarantees (RGs), which are essential financial instruments that protect shipowners’ advance payments should mid-sized shipbuilders fail to deliver vessels. By shielding banks from liability when they follow the guidelines, authorities hope to stimulate more active lending and guarantee issuance for the shipbuilders.

Refund guarantees are financial securities that secure the advance payments made by shipowners to shipbuilders throughout the shipbuilding process. The Financial Services Commission said operating profits for mid-sized shipbuilders surged from 329 billion won in 2022 to 1.78 trillion won ($1.24 billion) in 2024.

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