By Kim Tae-gyu
Staff Reporter
Fitch Ratings caught the country by surprise last Thursday when the world's top-tier rating agency came up with its stress test results on Korean banks ― which may lose 42 trillion won by 2010.
However, Fitch analyst Chang Hea-kyu, who conducted the stress test, said Wednesday that such a ``sky-is-falling'' scenario is unlikely, although there is a sufficient possibility.
``The (Fitch) report was about the stress test based on pessimistic scenarios, which Korean professionals can accept. Hence, I did not mean that it was our best prediction for the future,'' Chang said.
``It was intended to check how well Korean banks could withstand the economy deteriorating more quickly than expected. Accordingly, the possibility is low that the assumptions will be realized, even though I think it is a possibility,'' he said.
The Fitch test said that a majority of Korean banks will experience hitches in their basic capital ratio, as their combined losses are likely to reach 42 trillion won.
The test was built upon a set of hypotheses, such as domestic banks facing a 12-percent loss from construction loans and 10 percent from manufacturing loans through December 2010.
Local financial bureaucrats flatly rebuffed all the assumptions as overly pessimistic.
``As parameters for the stress testing, I don't find anything wrong with the assumptions we set via inside consultations,'' said Chang, who worked for Shinhan Bank for seven years before joining Fitch in 2007.
Regarding the criticism that Fitch is trying to penalize Korea for some reason, Chang claimed that the suspicion is groundless.
After the Fitch stress test was published late last week, Financial Services Commission (FSC) Chairman Chin Dong-soo even said, ``I don't understand why Fitch is doing this just to Korea.''
``I initiated the stress test myself late last year when Korean banks were expected to suffer from problems due to the financial distress. Nobody asked me to do it,'' Chang said.
``As far as I know, Fitch has conducted similar research elsewhere in Asia, such as in Hong Kong and Vietnam, and will continue to do so. I am a Korean myself and I don't buy into any conspiracy story,'' he said.
Asked about FSC Chairman Chin's complaints that Fitch did not factor in the banks' efforts to shore up their capital ratio, Chang rebuked them.
``Every company and even every individual can increase capital and I fully understand that. However, we cannot put it into the test because we don't know how much they will be able to raise,'' Chang said.
``Let me make it clear once again. This is just a stress test,'' said Chang, who became an analyst after being a career soldier.