Hong Kong, January 19, 2022 -- Moody's Investors Service has affirmed the Aa2 foreign currency
long-term issuer rating and P-1 short-term issuer
rating of Korea Housing Finance Corporation (KHFC).
The outlook on KHFC remains stable.
RATINGS RATIONALE
KHFC's Aa2 ratings reflect a very high level of support from the Government
of Korea (Aa2 stable), given the company's important policy function
of supporting Korea's housing sector. The ratings also consider
a very high level of dependence between KHFC and the Korean government,
given their very close operational and financial linkages. Moody's
believes that the probability of support from the Government of Korea
is near certain, which leads to the equalization of KHFC's issuer
rating with the government's rating.
KHFC is an important policy arm of the government that promotes national
economic development by facilitating the supply of housing finance on
a stable and long-term basis.
The ratings are further underpinned by Article 5 and Article 51 of the
KHFC Act, the charter under which KHFC operates. Article
5 stipulates that the government and the Bank of Korea must fully contribute
to the corporation's capital. Article 51 holds the government responsible
for KHFC's solvency, meaning that if the latter's reserves are insufficient
to absorb losses, the former is legally obligated to replenish the
deficit. Also, KHFC is wholly owned and controlled by the
government, through the ownership by the Ministry of Economy and
Finance (63.5%), the National Housing Urban Fund (5.2%)
and the Bank of Korea (31.3%) at the end of June 2021.
The government has a close relationship with KHFC through its supervision
of the company's operations, as well as its management and governance.
The company's steering committee consists of a president and five members
appointed by the Financial Services Commission and the Ministry of Land,
Infrastructure and Transport. The committee decides on the basic
policies for KHFC's operations, while the government appoints the
management team.
The corporation has a policy mandate to improve mid-to-low
income earners' access to housing finance. Its business areas cover:
(1) supplying long-term fixed-rate mortgages; (2) securitizing
long-term housing mortgage loans; and (3) managing two government
guarantee funds -- the Housing Finance Credit Guarantee
Fund for low-income households, and the JTYK Fund to guarantee
a reverse mortgage loan for the elderly. The government takes direct
responsibility for any losses from these two funds.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
WHAT COULD MOVE THE RATINGS UP
Moody's could upgrade KHFC's ratings if Korea's sovereign rating
is upgraded.
WHAT COULD MOVE THE RATINGS DOWN
Moody's could downgrade KHFC's ratings if (1) Korea's sovereign
rating is downgraded; (2) government support weakens, including
for instance, inadequate capital contribution from the government;
(3) the company's role changes significantly, such that its
importance to the government declines; or (4) the legal clauses that
outline the government's responsibility for KHFC's solvency change.
The principal methodology used in these ratings was Government-Related
Issuers Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186207.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Busan, Korea, KHFC was established on 1 March
2004. As of 31 December 2020, KHFC's total assets and
shareholders' equity amounted to KRW153.6 trillion and KRW3.8
trillion, respectively.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
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same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
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issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
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provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
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3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Younghun Kim
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Sophia Lee, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077