By Yoon Ja-young
Staff Reporter

The government is reacting sensitively to the foreign press, which it says ``exaggerate'' financial market troubles in the country.

``Foreign media say that the domestic banking industry is in trouble, but very often they make reports without fully understanding the facts,'' Financial Supervisory Service (FSS) Governor Kim Jong-chang said in a press conference Thursday.

The financial regulator as well as the government are promptly issuing press release's that refute the bad news.

The Ministry of Strategy and Finance issued a release criticizing the Financial Times' article ``Korean Banks,'' which said ``South Korea was always Asia's obvious trouble spot for financial contagion. Companies, banks and households are over-leveraged: private sector debt as a percentage of gross domestic product (GDP) stands at 180 percent.''

The ministry said the ratio of household debt to GDP is low compared with the United States or Britain, and added that the increase of households' financial assets should also be taken into account. It said the ratio of corporate debt to GDP has been falling since the Asian financial crisis. The FSS also said the corporate debt ratio fell to 107 from 425 in 1997. It added that interest coverage ratio, which shows businesses' ability to pay back loans, rose to 4.1 last year, up from 1.2 in 1997.

The ministry also refuted a Dow Jones' report that Fitch was concerned over possible insolvency at Korean banks. The ministry issued a press release saying the report was based on a mistranslation.

The Financial Services Commission also issued a press release on the International Herald Tribune's report on Korean banks' short-term foreign debt.

``Wrong and exaggerated reports by some foreign media are exacerbating the won-dollar rate. We will aggressively cope with this,'' said Choi Jong-ku, director general of the international financial bureau at the ministry.

The government's sensitive reaction to these reports is based on the determination that they worsen market sentiment. Some believe that foreign media's exaggerated news made Korea suffer more than it should have during the Asian financial crisis. However, other people point out that Korea's conservative media kept reporting that there was no such crisis just days before Korea asked the International Monetary Fund (IMF) for a bailout loan.

chizpizza@koreatimes.co.kr