Regulator pushes to clear soured PF loans by savings banks in June

SEOUL, June 1 (Yonhap) -- South Korea's financial regulator said Wednesday that it is pushing to tap public funds to pick up savings banks' soured property project finance loans this month as part of efforts to prop up the ailing sector.
The Financial Services Commission (FSC) and its executive body, the Financial Supervisory Service (FSS), are conducting on-site or written stress tests over 468 property projects financed by 89 local savings banks in order to screen out potential loan losses, the top regulator FSC said.
After a stress test is conducted between May 30-June 9, the regulator will push to sell loans classified as non-performing or likely to go sour to the Korea Asset Management Corp. (KAMCO) during June, it said.
"The latest measure of clearing bad assets is expected to improve management soundness of savings banks," the FSC said in a statement.
KAMCO will utilize its internal funds and 3.5 trillion won (US$3.3 billion) in public money earmarked for rescheduling soured debts, it said.
The measure came after savings banks' asset quality continued to tumble due to growing defaults on property project finance loans. A prolonged housing market slump crippled builders' ability to repay loans, resulting in a pileup of soured project finance loans on savings banks' balance sheets.
A total of eight savings banks had their business suspended earlier this year due to capital shortage stemming from losses from such loans.
As part of efforts to salvage the ailing sector, KAMCO picked up 5.2 trillion won of non-performing project finance loans between December 2008 and April 2010.
pbr@yna.co.kr