S. Korean banks' default rate for SME loans rises

SEOUL, Oct. 22 (Yonhap) -- South Korean companies' ability to repay debts
deteriorated in September as a weaker won and higher raw material costs
aggravated the financial difficulties of smaller firms, the financial watchdog
said Wednesday.
Local banks' delinquency ratio of Korean currency-based corporate loans reached
1.3 percent as of the end of September, up from 1.12 percent a year earlier,
according to the Financial Supervisory Service (FSS).
The loan default rate by small and medium enterprises (SMEs) came in at 1.5
percent as of the end of September, up from 1.22 percent from the previous year
as they felt the pinch amid deteriorating external conditions, the FSS said.
Meanwhile, local lenders' total default rate for won-based corporate and
household loans stood at 0.97 percent as of end-September, up 0.08 percentage
point from a year ago, it added.
The data came as South Korea's smaller companies are suffering from a cash
shortage as banks have become increasingly reluctant to extend loans amid the
global financial turmoil.
"Local banks' asset health remained sound generally, given low delinquency rates,
but as economic conditions at home and abroad are worsening, there are fears that
banks' financial soundness might be dented. The watchdog plans to beef up its
monitoring of bank lending to SMEs," it added.