Financial watchdog to press for corporate revamp

SEOUL, Sept. 27 (Yonhap) -- South Korea's financial watchdog will turn up the
heat on embattled companies to ramp up their restructuring efforts because of their recent foot-dragging, officials said Sunday.

Several troubled companies are under fire for being reluctant to revamp their
operations, believing that they could survive thanks to an economic recovery,
even without making restructuring efforts.
"The corporate restructuring drive is not making headway," said an official at
the Financial Supervisory Service (FSS). "Creditors will be urged to stop rolling
over the debts of companies refusing to making restructuring efforts."
Creditor banks will also recover maturing loans from such companies and will not
extend fresh loans to them, he said.
In addition, the FSS will require 22 financially troubled large companies to sign
agreements with their creditors on turnaround plans by mid-October, the source
said.
A total of 77 ailing small and medium enterprises will be obliged to ink such
agreements by the end of October, he added.
Local lenders are also being criticized for their unwillingness to eliminate
distressed assets from their balance sheets amid signs of an economic recovery,
stoking worries about their financial soundness.
On Wednesday, FSS Chairman Kim Jong-chang called on bank chiefs to step up their
corporate restructuring campaign and clear troubled assets drastically in an
effort to raise their financial strength.
The ratio of 18 local lenders' bad debts, or loans overdue more than three
months, stood at 1.5 percent against total lending as of the end of June, up 0.03
percentage point from three months earlier.
In early August, lenders agreed with the financial watchdog to drive down their
troubled loan rate to 1 percent by the end of this year.
The economy is showing early signs of recovery. South Korea's gross domestic
product grew 2.6 percent in the second quarter from three months earlier, the
fastest quarterly increase in more than five years, on solid exports.
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