South Korea's financial regulator said Tuesday that it will write off debts held by joint sureties during the 1997 Asian foreign exchange crisis as part of efforts to help the sureties escape from financial difficulties coming from other parties' debts.

As much as 70 percent of debt principals coming from the joint surety contract will be written off in accordance with the debt- servicing capabilities of the joint sureties during the 1997 Asian foreign exchange crisis, according to the Financial Services Commission (FSC).

For five years through 2001 when the Asian crisis lasted, massive corporate defaults in South Korea led many joint sureties to fall into defaults accordingly.

The joint surety system imputes the obligation to repay debts to other parties when a principal borrower defaults, causing a chain of defaults even to those who do not actually borrow money. The joint surety co-signs the loan contract to pay back money in the event of the principal borrower's default.

Those subject to the debt write-off will be debtors with a combined debt of less than 1 billion won ($900,000) in principal, the regulator said, noting that it will carry out debt- restructuring after purchasing debts from financial institutions.

The debt write-off will benefit around 97 percent of 113,830 debtors who have yet to repay debts coming from the joint surety contract during the Asian foreign exchange crisis.

In late-April, the regulator decided to abolish the joint surety system in the non-banking financial institutions starting from July following the abolition of such system in the banking sector in May 2012.