ID :
18940
Thu, 09/11/2008 - 15:54
Auther :
Shortlink :
https://oananews.org//node/18940
The shortlink copeid
Financial health of S. Korean banks remains sound: watchdog
SEOUL, Sept. 11 (Yonhap) -- South Korea's top financial regulator said Thursday the financial health of local banks remains sound, despite the increasing uncertainty of global financial markets and the slowing economy.
"The possibility that local banks' lending to smaller firms would go sour is
rising. But as long as the economy does not sharply cool down and the downturn is
not prolonged, I think lenders have enough capacity to absorb possible losses
themselves," Jun Kwang-woo, chairman of the Financial Services Commission
(FSC), told a forum. "The health of household loans and their capacity to
cope with losses remains sound."
His remarks came as the slowing economy is feared to raise loan default rates for
small and medium enterprises (SMEs). With Asia's fourth-largest economy losing
steam amid sluggish domestic demand, the credit risks of SME loans are likely to
increase in the third quarter, the central bank said in a report issued in early
July.
According to the Bank of Korea, the growth of South Korean bank loans to
companies sharply slowed down in August as lenders looking to strengthen their
risk management tightened their grip on lending to smaller firms.
The FSC said the loan default rate by SMEs came in at 1.4 percent as of the end
of July, up from 1.14 percent at the end of June.
Meanwhile, Jun said that local savings banks' lending for real estate project
financing has been affected amid slumping housing markets, adding that there is
not a high chance that such loans will go sour.
Smaller builders, which borrowed mostly from savings banks during the housing
market boom, are suffering from financial burdens caused by the slowing economy,
with some going out of business.
Regarding capital flight fears, Jun said, "The speculation proves to be
groundless ... The government will make efforts to prevent groundless rumors from
denting investor sentiment by beefing up its monitoring of market
situations."
South Korea has been gripped by fears over the possibility of a financial crisis
as overseas investors are rumored to be set to withdraw their capital from the
local bond market en masse this week. Foreigners, who hold South Korean bonds
worth US$6.71 billion that matured on Tuesday and Wednesday, snapped up a net 2.1
trillion won ($1.97 billion) worth of local bonds in September, according to the
Financial Supervisory Service.
sooyeon@yna.co.kr
(END)
"The possibility that local banks' lending to smaller firms would go sour is
rising. But as long as the economy does not sharply cool down and the downturn is
not prolonged, I think lenders have enough capacity to absorb possible losses
themselves," Jun Kwang-woo, chairman of the Financial Services Commission
(FSC), told a forum. "The health of household loans and their capacity to
cope with losses remains sound."
His remarks came as the slowing economy is feared to raise loan default rates for
small and medium enterprises (SMEs). With Asia's fourth-largest economy losing
steam amid sluggish domestic demand, the credit risks of SME loans are likely to
increase in the third quarter, the central bank said in a report issued in early
July.
According to the Bank of Korea, the growth of South Korean bank loans to
companies sharply slowed down in August as lenders looking to strengthen their
risk management tightened their grip on lending to smaller firms.
The FSC said the loan default rate by SMEs came in at 1.4 percent as of the end
of July, up from 1.14 percent at the end of June.
Meanwhile, Jun said that local savings banks' lending for real estate project
financing has been affected amid slumping housing markets, adding that there is
not a high chance that such loans will go sour.
Smaller builders, which borrowed mostly from savings banks during the housing
market boom, are suffering from financial burdens caused by the slowing economy,
with some going out of business.
Regarding capital flight fears, Jun said, "The speculation proves to be
groundless ... The government will make efforts to prevent groundless rumors from
denting investor sentiment by beefing up its monitoring of market
situations."
South Korea has been gripped by fears over the possibility of a financial crisis
as overseas investors are rumored to be set to withdraw their capital from the
local bond market en masse this week. Foreigners, who hold South Korean bonds
worth US$6.71 billion that matured on Tuesday and Wednesday, snapped up a net 2.1
trillion won ($1.97 billion) worth of local bonds in September, according to the
Financial Supervisory Service.
sooyeon@yna.co.kr
(END)
