More Small Companies Failing to Pay Back Loans
By Yoon Ja-young
Staff Reporter
An increasing number of small firms are failing to pay back bank loans on time amid the economic recession. Although local banks' financial stability is faring well compared to global banks, the increasing delinquency ratio is a cause for concern.
According to the Financial Supervisory Service (FSS), Thursday, the preliminary delinquency rate of won-denominated bank loans recorded 1.08 percent at the end of last December, up 0.34 percentage points from the previous year.
The rise was mostly due to corporate loans, the delinquency rate of which grew by 0.43 percentage points to 1.46 percent compared to a year ago. While the rate of large businesses fell 0.03 percentage points to 0.34 percent, that of small- and medium- sized businesses averaged 1.7 percent, surging 0.7 percentage points due to worsening business conditions. Their overdue loans totaled 7.2 trillion won, snowballing from 3.7 trillion won as of the end of 2007.
Banks' household loans, meanwhile, were stable. The delinquency rate of such loans stood at 0.6 percent, growing only 0.05 percentage points from the previous year. The rate of mortgages was 0.48 percent, also rising only 0.05 percentage points.
``The asset soundness of domestic banks and coverage ratio currently stand at favorable levels, while the delinquency rate has shown an upward trend due to the current economic downturn,'' the FSS said.
The regulator added that it would step up monitoring the growth of loans to smaller enterprises and the overall loan soundness of the banking sector. ``We would also encourage banks to strengthen their oversight of potential risk factors,'' it said.
It added that local banks are still better than the banks in the United States in terms of the soundness of assets. The ratio of bad debt was 0.83 percent as of September, much lower than the United States' 2.23 percent.
With efforts to collect overdue interest payments and the write-offs and sales of bad loans, the December delinquency rate was 0.10 percentage point lower than it was in November, according to the regulator.