Bank chiefs call for swift revamp of nonviable firms

SEOUL, Jan. 2 (Yonhap) -- South Korean lenders need to restructure nonviable
companies as quickly as possible in order to supply much-needed funds to viable
corporations, bank chiefs said Friday.
Despite the government's strong commitment, local lenders have been under fire
for hesitating to force troubled companies out of the market, which government
policymakers say is necessary for heading off an economic crisis.
Last week, the financial watchdog said the government will seek to overhaul
non-viable builders and shipbuilders starting in January, to prevent the fallout
from their bankruptcies from spilling over into the real economy.
In New-Year interviews with Yonhap News Agency, the chiefs of five local banks --
Kookmin, Shinhan, Woori, Hana and the Industrial Bank of Korea (IBK) -- stressed
the need for a swift corporate restructuring, which will give them room to lend
money to companies suffering a temporary liquidity squeeze.
"The process in discerning non-viable firms from healthy ones should be done
quickly. Then, banks can fully supply funds to companies which have chances for
revival," said Lee Chong-hwi, president of South Korea's third-largest lender
Woori Bank.
South Korean banks have been increasingly reluctant to lend money to companies
and households as the deepening economic slump and a credit crunch are increasing
the amount of bad debt.
Despite a liquidity supply by the Bank of Korea, funds are not fully flowing into
the real economy as money returns to the central bank through repurchase
agreement operations due mainly to risk aversion by banks.
"We plan to actively support healthy companies and help firms which show signs of
poor performance to revive through debt rescheduling programs," said Yun Yong-ro,
chairman of the state-owned IBK. "We will extend more loans to players which make
self-help efforts to restructure themselves."
Meanwhile, the bank heads said they will make their own efforts first to increase
their capital base rather than choose to tap a proposed 20-trillion-won (US$15.2
billion) fund aimed at helping banks boost capital.
The government is seeking to launch a fund in January to be used to buy preferred
stocks, subordinated bonds and hybrid debt sold by lenders. Local banks are to
tap the fund on a voluntary basis.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.86 percent as of the end of September, down 0.5 percentage point from three
months earlier, according to the financial watchdog.
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