> I hate to sound like that icon of pre-digital technology, the broken
> record, but... Korea was bailed out by the Japanese banks and their
> European counterparts, who agreed to roll over the chaebol's loans
> (Deutsche Bank helped refinance Hynix, e.g.).
IMF arranged $58.35 bn rescue package for SK in December 97. See the news report below.
Ulhas
The Financial Express
April 24, 2002
IMF Warns Over Complacency In South Korea Bank Sector
Seoul, April 23: South Korea should not become complacent about its banks, which have returned to profit and private hands after being at the epicentre of a financial crisis nearly five years ago, a senior IMF official said on Tuesday.
Tomas T Balino, the International Monetary Fund's senior advisor, praised South Korea for putting in place a regulatory and supervisory framework since the 1997-98 Asian financial crisis.
"They (the government) have made very significant progress especially in regulatory framework," said Balino, who is in Seoul to review the financial sector. "Much less emphasis on size but more emphasis on profitability." But the IMF official said in an interview with Reuters: "This (reform) is an ongoing process. You can't just relax and say we have done everything that has to be done."
The IMF arranged a $58.35 billion rescue package for Korea in December 1997 as the country teetered on the brink of a national default. Korea finished repaying all $21 billion it borrowed in stand-by credits from the fund last August.
South Korea's banking sector underwent wrenching, state-led mergers after the crisis but is now consolidating and looking to return to private ownership.
A lighter provisioning, sale of distressed assets and higher credit card fees helped the sector turn to profit in 2001 after four years of losses. South Korea's financial sector whittled away almost half of its bad loans last year as banks imposed tougher provisioning rules and the government assisted by buying distressed assets.
Bad loans at 1,550 domestic financial firms fell 46 per cent in 2001 to 35.1 trillion won from 64.6 trillion won a year earlier. "The economy has been doing extremely well with a fall in unemployment and foreign interest (in Korean assets)," Balino said. (Reuters)
"But you have to look at what would happen should the scenario change." The IMF wants South Korea to take a broader look at a systemic risk in the event of the economy slowing or facing a recession.
"A lot of problems are coming to light much earlier than used to be the case. They can be tackled in the early stages," he said. Balinos said growth in Korea's household credit needs close attention, but did not elaborate. South Korean banks, which were used to be heavily exposed to the corporate sector, have reshuffled their loan portfolios since the crisis and have moved quickly into the profitable household sector.
Household credit, which helped safeguard South Korea from last year's global slowdown, totalled 342 trillion won or 63 per cent of gross domestic product in 2001, raising concerns the sector might be overleveraged. South Korea's economy is expected to expand 5.9 per cent this year after a three per cent advance last year.
- Reuters
© 2002: Indian Express Newspapers (Bombay) Ltd. All rights reserved throughout the world.