IBK, Hana, Woori Cut Lending to Small Firms
By Kim Jae-kyoung
Staff Reporter
Despite the government's huge injection of liquidity, three local banks ― the Industrial Bank of Korea (IBK), Hana and Woori ― cut lending to small enterprises in December, ignoring struggling small firms and households.
According to the Financial Supervisory Service (FSS), the outstanding balance for the three banks' lending to small firms decreased this month.
As of Dec. 18, the IBK saw its balance for lending to small firms fall by 230 billion won from the end of November, while the comparable figure for Hana and Woori dropped by 180 billion won and 57 billion won, respectively.
Against this backdrop, the chief of the nation's financial regulator has increased pressure on local banks to make more credit available to crippled small companies and households.
``Banks' lending to smaller enterprises remains sluggish, while the economy is expected to undergo more difficult turmoil than during the 1997-1998 financial crisis,'' FSS Governor Kim Jong-chang said at a meeting with local bank CEOs Monday.
``Given that the current economic situation is different from what we experienced in the past, banks should be more active in lending to cash-strapped enterprises,'' he added.
He pointed out that the government's envisioned 20 trillion won bank re-capitalization fund will provide more room for lenders to extend loans to small firms and households.
Kim's move came after banks failed to re-channel the money they received from the Bank of Korea (BOK) to firms over fears that new lending will generate more bad assets.
Money supplied to banks has returned to the central bank's safe as local lenders deposited the liquidity right back, while shunning new loans. The central bank has supplied around 20 trillion won to local banks since Lehman Brothers filed for bankruptcy in September.
According to BOK, local banks' lending to small and medium-sized enterprises (SMEs) stood at 148.9 billion won for the first 18 days of this month, a major cutback from the previous month's 1.87 trillion won.
In response to Kim's request, the three banks said that they will make efforts to extend more loans to help struggling small companies and households avoid bankruptcy for the rest of December.