Bank's corporate loans dip by record amount in Dec.

SEOUL, Jan. 7 (Yonhap) -- South Korean banks' corporate lending fell by a record
amount in December as firms repaid debts to bolster balance sheets and lenders
made efforts to clean up bad loans, the central bank said Thursday.

As of the end of December, banks' outstanding corporate loans amounted to 506.2
trillion won (US$446.2 billion), down 11.7 trillion won from the previous month,
according to the Bank of Korea (BOK). The figure marked the largest monthly fall
since January 2002 when the bank began to compile related data.
"Banks' corporate lending sharply declined as smaller firms repaid their loans to
sweeten their year-end balance sheets and lenders wrote down large amounts of bad
debts," said a BOK official.
Last month, corporate loans declined more sharply compared with an average 3.6
trillion won fall seen between 2004 and 2008, the bank said.
The Financial Services Commission (FSC), the financial watchdog, advised local
banks to lower their bad debt ratio to around 1 percent by the end of last year
in a bid to help them brace for economic uncertainty.
Meanwhile, local banks' deposits also sharply declined mainly because sales of
certificates of deposit (CDs) tumbled, driven by banks' efforts to lower their
loan-deposit ratios, the BOK said.
Bank deposits reached an outstanding 1,007.5 trillion won as of the end of
December, down 8.3 trillion won from a month earlier. The December numbers marked
the steepest decline since January 2006 when bank deposits fell 12.7 trillion
won, it added.
Local banks will be required to keep their loan to deposit ratio, a gauge of a
bank's solvency, below 100 percent down the road, a move aimed at encouraging
them to beef up their financial soundness and liquidity management. According to
the FSC, the ratio stood at 112 percent as of the end of September when CDs are
excluded.
The data comes a day before the BOK makes its monthly interest-rate decision. The
central bank is widely forecast to freeze the benchmark seven-day repo rate at a
record low of 2 percent for the 11th straight month.
The bank cut the base rate by a total of 3.25 percentage points between October
2008 and February in an effort to bolster the economic slowdown.
sooyeon@yna.co.kr
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