[Yonhap News Photo]
The amount of bad loans extended by South Korean banks has been on the rise this year as South Korea's massive corporate restructuring is in store, officials data showed Thursday.
Data from the Financial Supervisory Service showed that banks had about 31.3 trillion won (26.4 billion US dollars) in non-performing loans at the end of March, up 6.6 trillion won from a year earlier.
Corporate bad loans accounted for more than 90 percent with banks exposed heavily to distressed companies in the shipbuilding, shipping and construction sectors. The rise in corporate bad loans has sent a danger signal to South Korea's economy as debt clearance has been delayed.
South Korean banks lag behind their global rivals in financial health due to lack of adequate risk management, according to KB Research. a private think tank.
Shipbuilders and container carriers, which have been under creditor-led or voluntary rehabilitation programs, have struggled to shed their snowballing debt through asset selling, a cut in their workforce and layoffs.
The country's top three shipyards -- Hyundai Heavy Industries, Daewoo Shipbuilding $ Marine Engineering, and Samsung Heavy Industries -- hold more than $40 billion in loans between them.
Now Korea Development Bank and other state-run lenders are reluctant to extend loans to shipbuilders due to their high exposure, challenging them to go bankrupt or reduce their debt through the painful process of restructuring.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
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