S. Korea to buy bad loans from banks, other financial firms

SEOUL, Dec. 5 (Yonhap) -- South Korea plans to buy bad loans from local banks and
other financial companies as a deepening economic slump is set to turn more loans
sour, sources at the financial regulator said Friday.

On Wednesday, the government said state-run Korea Asset Management Corp. (KAMCO)
will purchase 1.3 trillion won (US$876 million) worth of loans extended by
savings banks to finance real estate projects that are highly likely to turn
sour.
"Should takeover prices be regarded as appropriate, KAMCO may buy bad loans from
banks, securities firms and other financial companies," said an official at the
Finance Services Commission.
Loans extended by banks and other financial firms to fund construction projects
are deteriorating as builders are being hit by the sluggish property market.
According to the financial regulator, a total of 78.9 trillion won in loans were
extended to finance real estate projects as of end-June, with banks offering 47.9
trillion won of the total amount.
The average delinquency rate on so-called project financing at banks and insurers
stood at 0.64 percent and 2.4 percent, respectively, as of end-September, far
lower than the ratio of 16.9 percent at savings banks.
But the financial authorities forecast a deepening economic slowdown could
increase bad loans down the road.
KAMCO purchased massive debts from ailing financial companies in the wake of the
financial crisis that hit the country in late 1997. The debt restructuring agency
later recouped some of the debts after turning them around.
sam@yna.co.kr
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