Local banks offer 3.1 tln won to smaller firms in Feb.

SEOUL, March 9 (Yonhap) -- Local banks provided 3.1 trillion won (US$2 billion)
in loans to smaller companies last month in a bid to help them better cope with
cash shortages amid the slumping economy, the nation's financial watchdog said
Monday.
Outstanding loans extended by a total of 18 local lenders to smaller companies
reached 428.5 trillion won in February, according to the Financial Services
Commission. Loans to small and medium enterprises (SMEs) gained 3 trillion won in
January after declining 1.8 trillion won in December as banks tried to shore up
their balance sheets at the year-end by reducing bad loans.
The data comes as the watchdog plans to inject an initial 12 trillion won into
local banks in March out of a 20 trillion won bank recapitalization fund that
will be used to buy subordinated bonds and hybrid debt from lenders. The move is
aimed at encouraging lenders to extend more loans by boosting their capital base.
Local banks have been wary of increasing loans to smaller firms as the slowing
economy and a corporate restructuring drive are increasing the amount of bad
debt.
Two state guarantee agencies began to expand credit guarantees for smaller firms
last month and local banks agreed to roll over all loans maturing this year
except those extended to bankrupt companies.
The delinquency rate of bank loans to SMEs stood at 2.36 percent in January, up
from 1.7 percent in December and the highest level since 2.44 percent in August
2005.
sooyeon@yna.co.kr
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