ID :
58713
Sun, 05/03/2009 - 19:14
Auther :
Shortlink :
https://www.oananews.org//node/58713
The shortlink copeid
Banks to penalize troubled firms for lax overhaul efforts
SEOUL, May 3 (Yonhap) -- South Korean banks will take punitive measures against
companies that are in financial difficulty but reluctant to restructure their
operations as part of efforts to speed up the nation's corporate revamp,
officials said Sunday.
The measures come as troubled companies are unwilling to downsize and banks are
unenthusiastic about the restructuring efforts, fearing that weeding out troubled
corporate clients may increase their losses.
"Main creditor banks will stop providing new loans to embattled companies whose
restructuring efforts are deemed insufficient," a ranking financial regulator
said, asking not to be named. "Banks will also recover existing loans from them."
The government will also take disciplinary measures against the heads of creditor
banks of those lax companies, he added.
As part of the overhaul drive, liquidity-squeezed large business groups are
expected to sign agreements with creditor banks calling for enhancing their
financial health next month, according to the Financial Supervisory Service, or
the financial watchdog.
Since April, local banks have been assessing the financial health of 45 Korean
conglomerates whose debt accounts for more than 0.1 percent of total credit
provided by the banking sector.
If some of the business groups are found to be financially unhealthy, local banks
are expected to sign agreements requiring them to beef up their financial
conditions by the end of May by selling assets or affiliates.
According to industry sources, nearly 14 business groups fall short of standards,
and about 10 conglomerates are expected to sign such deals with creditor banks.
South Korea's corporate restructuring drive started amid growing fears that a
possible chain reaction of business failures amid a severe economic downturn
would undermine the soundness of the banking sector, dealing a harsh blow to
corporate Korea.
The South Korean economy just averted a recession in the first quarter of this
year by growing 0.1 percent from three months earlier. Asia's fourth-largest
economy shrank 5.1 percent for the fourth quarter of last year.
The Bank of Korea predicted that the local economy will shrink 2.4 percent this
year, the worst performance in more than a decade, stung by falling exports and
weakening domestic demand.
(END)
companies that are in financial difficulty but reluctant to restructure their
operations as part of efforts to speed up the nation's corporate revamp,
officials said Sunday.
The measures come as troubled companies are unwilling to downsize and banks are
unenthusiastic about the restructuring efforts, fearing that weeding out troubled
corporate clients may increase their losses.
"Main creditor banks will stop providing new loans to embattled companies whose
restructuring efforts are deemed insufficient," a ranking financial regulator
said, asking not to be named. "Banks will also recover existing loans from them."
The government will also take disciplinary measures against the heads of creditor
banks of those lax companies, he added.
As part of the overhaul drive, liquidity-squeezed large business groups are
expected to sign agreements with creditor banks calling for enhancing their
financial health next month, according to the Financial Supervisory Service, or
the financial watchdog.
Since April, local banks have been assessing the financial health of 45 Korean
conglomerates whose debt accounts for more than 0.1 percent of total credit
provided by the banking sector.
If some of the business groups are found to be financially unhealthy, local banks
are expected to sign agreements requiring them to beef up their financial
conditions by the end of May by selling assets or affiliates.
According to industry sources, nearly 14 business groups fall short of standards,
and about 10 conglomerates are expected to sign such deals with creditor banks.
South Korea's corporate restructuring drive started amid growing fears that a
possible chain reaction of business failures amid a severe economic downturn
would undermine the soundness of the banking sector, dealing a harsh blow to
corporate Korea.
The South Korean economy just averted a recession in the first quarter of this
year by growing 0.1 percent from three months earlier. Asia's fourth-largest
economy shrank 5.1 percent for the fourth quarter of last year.
The Bank of Korea predicted that the local economy will shrink 2.4 percent this
year, the worst performance in more than a decade, stung by falling exports and
weakening domestic demand.
(END)
