South Korean banks susceptible to bad SME loans
(4 July 2005 – South Korea) SMEs in South Korea are still struggling after the credit crisis in 2003 with debt delinquencies rising to 2.9 percent at the end of December.
The figure was an improvement, however, on figures seen last year when the percentage of SME delinquent loans reached 3.1.
South Korea’s financial watchdog, the Financial Supervisory Service, said in a report that although banks were set to post increased earnings in 2005, they could be undermined by debt defaulting small businesses.
"Risks persist due to an increase in the portion of short term retail loans and a possible deterioration in profitability and asset quality from overheated competition," the FSS said.
The watchdog said that domestic and foreign banks had tried to win market share by offering higher deposit rates while cutting lending rates.
The FSS said SMEs had displayed no visible improvement in their businesses over the past two years.
South Korea’s financial watchdog, the Financial Supervisory Service, said in a report that although banks were set to post increased earnings in 2005, they could be undermined by debt defaulting small businesses.
"Risks persist due to an increase in the portion of short term retail loans and a possible deterioration in profitability and asset quality from overheated competition," the FSS said.
The watchdog said that domestic and foreign banks had tried to win market share by offering higher deposit rates while cutting lending rates.
The FSS said SMEs had displayed no visible improvement in their businesses over the past two years.
Subscribe