S. Korean banks to gauge financial risks at smaller firms

By Park Bo-ram
SEOUL, June 18 (Yonhap) -- South Korean banks will assess the financial risks of
some 800 smaller companies as part of efforts aimed at preventing a chain of
corporate defaults, the country's financial watchdog said Thursday.
"Local banks will finalize their evaluation of financial risks at 800
small-and-medium-sized enterprises by mid-July," said Kim Jong-chan, governor of
the Financial Supervisory Service (FSS), citing a plan summited by local banks.
Following the assessments, banks are expected to stop lending to unviable firms
and reschedule debts or extend more loans to cash-strapped but viable companies,
according to Kim.
The governor said after the completion of the banks' risk evaluation, the
financial watchdog plans to monitor the validity of their assessment.
His comments come after local lenders placed 33 subsidiaries of local
conglomerates under corporate revamp plans. The banks decided last week to stop
extending loans to 11 firms and revive another 22 companies by rescheduling their
debts.
The sweeping corporate restructuring drive comes amid fears that the economic
downturn will erode the financial health of banks and limit their ability to
extend much-needed loans.
The Bank of Korea, the nation's central bank, predicted that the local economy
will likely shrink 2.4 percent this year, the worst performance in more than a
decade, pummeled by falling exports and sluggish local consumption.
pbr@yna.co.kr
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