Korea"s financial regulator said yesterday local lenders are set to draw up measures to restructure ailing shipping companies by the end of this month.
Korea"s financial regulator said yesterday local lenders are set to draw up measures to restructure ailing shipping companies by the end of this month, the latest in a series of bank-led moves to overhaul struggling sectors. Local shippers, which had enjoyed a business boom due to rising shipping rates and high demand, have been feeling the pinch of the slump in global trade, with some facing a severe liquidity squeeze.
?The watchdog plans to advise local banks to draw up revamping measures for troubled shipping lines by the end of this month and to implement them promptly,? the Financial Services Commission said in a report to the National Assembly.
Local banks are in the process of assessing the health of 37 shippers, and the government plans to create a fund worth up to 4 trillion won ($3 billion) to purchase idle ships from local shipping companies in a bid to boost their sales and prevent them from being sold at discount prices. Local shippers owe a combined 16 trillion won to the local financial sector.
The move is part of the ongoing bank-led corporate restructuring drive encompassing builders, shipyards and shippers to provide capital to viable companies by sorting out ailing firms.
Meanwhile, state-run debt clearer Korea Asset Management Corp. will start buying part of the trillions of won in property loans extended by local banks and other financial firms in May to improve their financial health.
Smaller builders, which borrowed mostly from savings banks to buy property during the 2005-2006 housing market boom, have been struggling to service their debts. Concerns have mounted that if a number of such loans turn sour it would undermine the soundness of the banking sector, dealing a blow to the whole economy.
Property-linked loans by financial firms, excluding savings banks, totaled 69.5 trillion won at the end of September, and 4.7 trillion won or 7 percent of that had a risk of default, the FSC said.
Kamco, established in late 1997, has purchased bad debts worth 1.7 trillion won related to property loans extended by local savings banks.
Local banks have begun to receive capital injections through a 20 trillion won bank recapitalization fund as non-performing loans are piling up.
In a report to the Assembly, the Financial Supervisory Service said that local lenders have raised a combined 23.7 trillion won in capital to cope with the slumping economy and corporate restructuring measures. They sold 9.1 trillion won in subordinated bonds and 4.4 trillion won worth of hybrid debt, boosting their capital adequacy ratios.