ID :
22881
Mon, 10/06/2008 - 20:22
Auther :
Shortlink :
http://m.oananews.org//node/22881
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Korean banks expected to tighten lending to smaller firms in Q4
SEOUL, Oct. 6 (Yonhap) -- South Korean banks are forecast to tighten their grip
on lending to smaller companies in the fourth quarter, as credit risks for such
firms are likely to hit an over 5-year high amid the slowing economy, the central
bank said Monday.
The index gauging local banks' lending behavior to small and medium enterprises
(SMEs) was minus 41 for the October-December period, compared with minus 34 for
the third quarter, according to a survey of 16 lenders by the Bank of Korea
(BOK). The index reached its lowest level since the first quarter of 1999 when
the BOK began to compile related data.
The lower the reading, the more likely that banks will tighten their restrictions
on lending.
"Amid growing uncertainty at home and abroad, local banks are expected to
strengthen their criteria on loans to SMEs due to fears of rising credit risks,"
a BOK official said.
The report came as South Korean banks, which are suffering from dollar shortages,
have become less aggressive in extending loans amid global financial turmoil
sparked by the collapse of investment bank Lehman Brothers Holdings Inc.
Slowing economic growth and higher inflation are feared to eat into consumer and
business spending, which may raise loan delinquency rates.
Credit risks for smaller companies, or the likelihood of borrowers not repaying a
loan or debt, are expected to increase sharply in the fourth quarter as loan
default rates for sectors like construction are showing signs of rising and their
profitability will likely worsen amid financial troubles, the BOK said.
The index gauging credit risks of smaller companies reached 50 in the
October-December period, up from 47 in the third quarter. The fourth-quarter
credit risks reached its highest level since the third quarter of 2003 when the
index reached 50, the BOK added.
The central bank also said loan demand by SMEs is forecast to expand as companies
may need to borrow more money to cover costs related to rising inventory and
sluggish sales amid a slowing economy.
on lending to smaller companies in the fourth quarter, as credit risks for such
firms are likely to hit an over 5-year high amid the slowing economy, the central
bank said Monday.
The index gauging local banks' lending behavior to small and medium enterprises
(SMEs) was minus 41 for the October-December period, compared with minus 34 for
the third quarter, according to a survey of 16 lenders by the Bank of Korea
(BOK). The index reached its lowest level since the first quarter of 1999 when
the BOK began to compile related data.
The lower the reading, the more likely that banks will tighten their restrictions
on lending.
"Amid growing uncertainty at home and abroad, local banks are expected to
strengthen their criteria on loans to SMEs due to fears of rising credit risks,"
a BOK official said.
The report came as South Korean banks, which are suffering from dollar shortages,
have become less aggressive in extending loans amid global financial turmoil
sparked by the collapse of investment bank Lehman Brothers Holdings Inc.
Slowing economic growth and higher inflation are feared to eat into consumer and
business spending, which may raise loan delinquency rates.
Credit risks for smaller companies, or the likelihood of borrowers not repaying a
loan or debt, are expected to increase sharply in the fourth quarter as loan
default rates for sectors like construction are showing signs of rising and their
profitability will likely worsen amid financial troubles, the BOK said.
The index gauging credit risks of smaller companies reached 50 in the
October-December period, up from 47 in the third quarter. The fourth-quarter
credit risks reached its highest level since the third quarter of 2003 when the
index reached 50, the BOK added.
The central bank also said loan demand by SMEs is forecast to expand as companies
may need to borrow more money to cover costs related to rising inventory and
sluggish sales amid a slowing economy.
