Local bank loans to companies dip in Dec.

SEOUL, Jan. 8 (Yonhap) -- South Korean bank loans to firms declined in December
on seasonal factors as they beefed up their risk management to bolster falling
capital adequacy ratios at the year-end, the central bank said Thursday.
As of the end of December, outstanding bank loans to large and smaller firms
totaled 459.7 trillion won (US$349.2 billion), down 6.6 trillion won from a month
earlier, the Bank of Korea (BOK) said.
"For seasonal reasons, corporate loans declined last month as lenders tried to
raise the capital adequacy ratio and companies borrowed less to bolster balance
sheets," a BOK official said. "But excluding a one-off factor, bank lending in
December fell less than expected, affected by the government's call to boost
loans to smaller firms."
South Korean lenders are struggling to jack up the declining capital adequacy
ratio, a key barometer of financial soundness, by scaling back on loans or
selling subordinated bonds.
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.
Bank loans to larger companies decreased by 2.8 trillion won to 59.4 trillion
won. Lending to small and medium enterprises fell by 3.8 trillion won to 400.3
trillion won, the BOK said.
Meanwhile, bank deposits declined the most in December in nearly three years
mainly because the BOK has aggressively cut the policy rate and lenders less sold
certificates of deposit.
As of end-December, outstanding bank deposits totaled 906.5 trillion won, down
10.9 trillion won from the previous month, according to the central bank. Bank
deposits fell for the first time since March 2008 when they declined 6 trillion
won, and they shed the largest margin since November 2006 when deposits fell 11.6
trillion won, it added.
The data came a day before the BOK holds its monthly rate-setting meeting.
Economists say the BOK is widely expected to cut its key interest rate by 0.5
percentage point to 2.5 percent to jumpstart the sputtering economy.
In December, the BOK lowered the borrowing costs by a record full percentage
point to an all-time low of 3 percent. Since early October, it has trimmed the
policy rate by a combined 2.25 percentage points.
sooyeon@yna.co.kr
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