Government to Lead Restructuring

FSC Chmn. Chin also says BIS ratio of 10 pct good enough and strategic team for restructuring to include civilian experts

Chairman Chin Dong-soo of the Financial Service Commission, said the commission would have to look at the whole industry, not just a company in financial trouble in going about selecting firms for restructuring and for successful restructuring of insolvent firms
The corporate restructuring would have to be worked out among the banks, the government and the private sector, a triangular system, said the FSC chairman in explaining his position on picking the financially troubled business firms for restructuring as the head of the FSC, the powerful watchdog of the financial industry in Korea.
He said banks will be the main player of restructuring, but the government and a civilian group should also participate in the moves to make them successful. He said if necessary, the formation of a strategic team made of banks, the government and private sector may be necessary to make the restructuring successful.
Chin also said the BIS standard on own capital rate currently is 10 percent, and banks have been encouraged to raise it to 12 percent to prevent possible increases in bad loans. But he said the FSC would not take measures against banks whose BIS rate stay below 12 percent.
The FSC chairman said the role of the financial authority in the area of restructuring is necessary to the extent that the national economy and the industry as a whole should be considered in the decisions on restructuring.
Chin also mentioned that the real integrated financial support team set up jointly by the Ministry of Knowledge Economy and the FSC and the team will be led by FSC Vice Chairman Lee Chang-yong backed up by a civilian advisory group to be formed later.
The FSC chairman also unveiled that a restructuring fund will be created with the participation of the Korea Asset Management Corp., Korea Development Bank and civilian investors in order to bring private capital into the fund.
Chin also said it is not the time for injection of public funds into banks as the funding operations by banks has not yet reached the difficult stages, meaning that the soundness of banks are still healthy. He said the BIS ratio of 10 percent and the first Tier ratio of 7 percent are good enough for banks to show that they are healthy.
Chairman Chin also revealed that a workout system for individual borrowers who got loans from more than one bank and have trouble paying interests on those loans. They will have the interest rates cut, along with the extension of loan repayment periods. The significance of the work-out system is to prevent a borrower from becoming a loan defaulter as if he fails to pay interests on his loans for three months, he will be classified as a financial defaulter and put on the list, which will bar him from borrowing any loans from banks.
He will also see that the small amount financial foundation set up by banks with the idle deposit funds at banks and invigorate small loans on credit and revitalize the operation of credit associations.
In the meantime, banks have been moving rapidly to take care of corporate loan defaulters by conducting the inspection of the business firms that defaulted on their loans, especially, those in the sectors of shipbuilding and construction to move up the normalization of those insolvent firms by three weeks.
Kookmin Bank, for one, appointed Samchong Accounting Inc. to charge of the accounting of Shinil Construction and two small shipbuilding firms financially insolvent and about to put through work-out programs, not the entire 11 construction and 3 shipbuilding firms who became insolvent and are about to be put through workout by banks.
Woori Bank appointed an accounting firm to investigate the financial conditions of Poonlim Industry,Woorim Construction, Samho and Dongmun Construction firms.
Shinhan Bank also launched financial investigations on its corporate borrowers who defaulted on its loans including World Construction, and Kyungnam Construction. Korea Exchange Bank also has began a financial investigation on its corporate borrowers defaulted on its loans including Isu Construction, naming Anjin Deloitte as the credit investigator. Kwangju Bank has been investigation credit conditions of Samnung Construction.
Korea Development Bank is about to start a credit investigation of Korea Shipping Co. unless the shipping company submits its restructuring program by the promised date. nw

Chairman Chin Dong-soo of the Financial Service Commission