Six banks to launch debt clearer

SEOUL, Aug. 20 (Yonhap) -- Six South Korean banks agreed Thursday to launch a
private debt clearer in late September to buy around 5 trillion won (US$4
billion) in bad assets, an industry association said.

Top lender Kookmin Bank and five other lenders reached a preliminary agreement to
create a so-called bad bank on Sept. 30 by pooling a combined 1.5 trillion won,
according to the Korea Federation of Banks. The debt clearing agency would run
until 2014, it added.
Currently, the state-run Korea Asset Management Corp. (KAMCO) has a near monopoly
on the country's debt-clearing market. The move comes as local banks are trying
to clean their balance sheets independently so they won't have to sell distressed
assets at a discount.
Recently, South Korea's financial watchdog urged local lenders to lower their bad
loan ratio to below 1 percent by year-end, saying that they need to bolster
financial soundness in a preemptive way amid economic uncertainty.
As of the end of June, their problem loans totaled 19.6 trillion won, 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.
To meet the new guideline, local banks may have to clear nearly 20 trillion won
in bad loans from their balance sheets.
sooyeon@yna.co.kr
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