Bad loans at financial firms surge amid slump, restructuring

SEOUL, May 24 (Yonhap) -- The number of distressed loans at South Korean banks
and non-bank financial institutions has surged in recent months due to a
prolonged economic slump and a corporate restructuring drive, government data
showed Sunday.

As of the end of March, local financial institutions had 31 trillion won (US$24.9
billion) in nonperforming loans, up 10.4 trillion won from six months earlier,
according to the data by the Financial Services Commission.
The leap comes as problem loans are piling up at financial institutions amid the
economic slowdown and a full-fledged restructuring drive for highly indebted
construction companies and shipbuilding firms, according to the financial
watchdog.
To tackle the problem of growing bad loans, the government plans to have Korea
Asset Management Corp., the state debt-clearer, purchase around 4.7 trillion won
in soured property-related loans.
South Korea is also pushing to establish a 20 trillion won fund within this year
that will be used buy distressed loans from financial institutions.
In addition, local commercial banks are moving to set up a bad bank to be
capitalized with around 2 trillion won in September, which will be charged with
purchasing dud loans from lenders and disposing of them.
The South Korean economy is swamped in a severe slump, hit by a plunge in
overseas demand for its goods. The economy grew a mere 0.1 percent on-quarter in
the January-March period following a 5.1 percent quarterly contraction three
months earlier.
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