ID :
72978
Thu, 07/30/2009 - 20:00
Auther :
Shortlink :
https://www.oananews.org//node/72978
The shortlink copeid
Korean banks urged to lower bad loan ratio to 1 pct
(ATTN: RECASTS headline, lead; REWRITES throughout)
SEOUL, July 30 (Yonhap) -- South Korea's financial watchdog urged local banks
Thursday to lower their bad loan ratio to below 1 percent by year-end, citing
mounting concerns about their balance sheets.
As of end-June, their problem loans totaled 19.6 trillion won (US$15.8 billion),
or 1.5 percent of total lending and up from 19.3 trillion won three months
earlier. A bad loan ratio refers to the rate of nonperforming loans to aggregate
lending.
"Although the growth of distressed loans has recently eased, there is still a
chance that bad debts could increase in accordance with the corporate
restructuring and the pace of an economic recovery in the second half," Choo
Kyung-ho, director-general at the financial policy bureau of the Financial
Services Commission (FSC), said in a press conference. "There is the need to
bolster banks' financial soundness in a preemptive way."
To meet the new guideline, local banks may have to clear nearly 20 trillion won
in bad loans from their balance sheets. The Financial Supervisory Service will
assess their progress on a quarterly basis.
"There would be no penalty to be imposed on banks even if they could not lower
the ratio below the guidance," Choo said.
Bad loan growth slowed in the second quarter as local financial firms wrote off
3.4 trillion won in soured debts, more than a quarterly average of 1.3 trillion
won. But an ongoing corporate restructuring drive and economic uncertainty could
increase the number of bad debts, compromising lenders' financial soundness.
The watchdog said that because the process of clearing bad loans could hurt the
capital adequacy ratio of local banks, the government has said it will tap a 20
trillion won recapitalization fund to help lenders in need.
Local banks are making their own efforts to keep their balance sheets clean. Top
lender Kookmin Bank and five other banks are planning to create a debt-clearing
agency in September by pooling a combined 1.5 trillion won so they won't have to
sell distressed assets at a discount. Currently, the state-run Korea Asset
Management Corp. (KAMCO) has a near monopoly on the country's debt-clearing
market.
The watchdog said it will aggressively buy bad debts by tapping more of a state
restructuring fund. To help financial firms clean their balance sheets, the
government plans to spend 20 trillion won this year out of a 40 trillion won fund
to buy bad debts and purchase assets from ailing companies.
The FSC said the fund has bought bad property-linked loans worth 816.4 billion
won from the local banking sector and purchased 17 out of 62 idle vessels from
ailing local shipping lines, which are being told to sell their assets as part of
restructuring efforts.
"The government will seek to revise related laws to allow private equity funds to
increase investments in distressed loans," the watchdog added.
sooyeon@yna.co.kr
(END)
SEOUL, July 30 (Yonhap) -- South Korea's financial watchdog urged local banks
Thursday to lower their bad loan ratio to below 1 percent by year-end, citing
mounting concerns about their balance sheets.
As of end-June, their problem loans totaled 19.6 trillion won (US$15.8 billion),
or 1.5 percent of total lending and up from 19.3 trillion won three months
earlier. A bad loan ratio refers to the rate of nonperforming loans to aggregate
lending.
"Although the growth of distressed loans has recently eased, there is still a
chance that bad debts could increase in accordance with the corporate
restructuring and the pace of an economic recovery in the second half," Choo
Kyung-ho, director-general at the financial policy bureau of the Financial
Services Commission (FSC), said in a press conference. "There is the need to
bolster banks' financial soundness in a preemptive way."
To meet the new guideline, local banks may have to clear nearly 20 trillion won
in bad loans from their balance sheets. The Financial Supervisory Service will
assess their progress on a quarterly basis.
"There would be no penalty to be imposed on banks even if they could not lower
the ratio below the guidance," Choo said.
Bad loan growth slowed in the second quarter as local financial firms wrote off
3.4 trillion won in soured debts, more than a quarterly average of 1.3 trillion
won. But an ongoing corporate restructuring drive and economic uncertainty could
increase the number of bad debts, compromising lenders' financial soundness.
The watchdog said that because the process of clearing bad loans could hurt the
capital adequacy ratio of local banks, the government has said it will tap a 20
trillion won recapitalization fund to help lenders in need.
Local banks are making their own efforts to keep their balance sheets clean. Top
lender Kookmin Bank and five other banks are planning to create a debt-clearing
agency in September by pooling a combined 1.5 trillion won so they won't have to
sell distressed assets at a discount. Currently, the state-run Korea Asset
Management Corp. (KAMCO) has a near monopoly on the country's debt-clearing
market.
The watchdog said it will aggressively buy bad debts by tapping more of a state
restructuring fund. To help financial firms clean their balance sheets, the
government plans to spend 20 trillion won this year out of a 40 trillion won fund
to buy bad debts and purchase assets from ailing companies.
The FSC said the fund has bought bad property-linked loans worth 816.4 billion
won from the local banking sector and purchased 17 out of 62 idle vessels from
ailing local shipping lines, which are being told to sell their assets as part of
restructuring efforts.
"The government will seek to revise related laws to allow private equity funds to
increase investments in distressed loans," the watchdog added.
sooyeon@yna.co.kr
(END)