Bad loan ratio hits 4-yr high of 1.50 pct at end-June
* Private bad bank to be launched with 1.5 trln won injection
(Adds details from statement)
SEOUL, July 30 (Reuters) - South Korea's financial watchdog said on Thursday it would advise banks to lower their bad loan ratios to 1 percent by year end as they brace for more soured debt created in the corporate restructuring process.
Problem loans, defined as those for which payments are more than three months overdue, rose to an average 1.50 percent of domestic banks' total credit at the end of June, the highest level since 1.65 percent in June 2005.
"In August, the Financial Supervisory Service (FSS) will discuss and set targets with each bank and examine their achievements going forward," said Choo Kyung-ho, a director general of the Financial Services Commission (FSC), in a briefing.
"In principle, each bank should aim for 1 percent, without consideration of their specific situation."
The FSS is under the FSC's supervision.
In the second quarter alone, bad loans increased by 7.6 trillion won for South Korean banks, led by unpaid corporate loans and credit card receivables. The lenders picked ailing companies during the first half for which debt would be rescheduled or new lifelines cut off.
South Korean banks, led by Kookmin and Shinhan, cleaned up a combined 3.4 trillion won ($2.7 billion) worth of problem loans in the quarter ended June, more than half of the amount they disposed of in 2008 through write-offs and sales, the FSC said in a statement.
Woori Bank, the country's No. 2 lender and a unit of Woori Finance Holdings (053000.KS), logged the highest bad loan ratio of 1.77 percent, compared with 1.34 percent for Kookmin and 1.59 percent for Shinhan Bank.
Kookmin and five other banks are preparing to set up a private bad bank in September with a total investment of 1.5 trillion won to compete with state-run debt clearer Korea Asset Management Corp in buying their non-performing loans, the FSC said.
($1=1243.8 Won)
* Private bad bank to be launched with 1.5 trln won injection
(Adds details from statement)
SEOUL, July 30 (Reuters) - South Korea's financial watchdog said on Thursday it would advise banks to lower their bad loan ratios to 1 percent by year end as they brace for more soured debt created in the corporate restructuring process.
Problem loans, defined as those for which payments are more than three months overdue, rose to an average 1.50 percent of domestic banks' total credit at the end of June, the highest level since 1.65 percent in June 2005.
"In August, the Financial Supervisory Service (FSS) will discuss and set targets with each bank and examine their achievements going forward," said Choo Kyung-ho, a director general of the Financial Services Commission (FSC), in a briefing.
"In principle, each bank should aim for 1 percent, without consideration of their specific situation."
The FSS is under the FSC's supervision.
In the second quarter alone, bad loans increased by 7.6 trillion won for South Korean banks, led by unpaid corporate loans and credit card receivables. The lenders picked ailing companies during the first half for which debt would be rescheduled or new lifelines cut off.
South Korean banks, led by Kookmin and Shinhan, cleaned up a combined 3.4 trillion won ($2.7 billion) worth of problem loans in the quarter ended June, more than half of the amount they disposed of in 2008 through write-offs and sales, the FSC said in a statement.
Woori Bank, the country's No. 2 lender and a unit of Woori Finance Holdings (053000.KS), logged the highest bad loan ratio of 1.77 percent, compared with 1.34 percent for Kookmin and 1.59 percent for Shinhan Bank.
Kookmin and five other banks are preparing to set up a private bad bank in September with a total investment of 1.5 trillion won to compete with state-run debt clearer Korea Asset Management Corp in buying their non-performing loans, the FSC said.
($1=1243.8 Won)
