COMMENTS FROM THE FSC

(November 25th, 1998)

¡¡

Bank Nonperforming Loans at end-September, 1998

¡¡

¤· As of end-September, 1998, total nonperforming loans (loans classified as either substandard, doubtful or estimated loss) of 22 commercial banks stood at 22.42 trillion won, representing a drop of 6.65 trillion won, or 22.9%, compared to total NPL of 29.77 trillion won at end-June, 1998. This leaves the NPL ratio at end-September, 1998 at 7.1%, a 1.5%p drop from the 8.6% recorded as of end-June, 1998. Total loans amounted to 314.54 trillion won at end-September, 1998.

¡¡

¤· In the 3rd quarter of 1998, 2.62 trillion won worth of loans were reclassified as nonperforming owing to strengthening of loan classification standards (refer to [ Strengthening of Loan Classification Standards and Provisioning Requirements] below), whereas 4.45 trillion won were newly classified as nonperforming. Nonetheless, total NPL dropped during this period due to sale of NPLs worth 13.28 trillion won to the Korea Asset Management Corporation.

¡¡

Total NPLs of Commercial Banks

(in 100 million won, %)

`

end-Dec ¡®90

end-Dec

¡®92

end-Dec

¡®94

end-Dec

¡®95

end-Dec

¡®96

end-Dec

¡®97

end-Jun

¡®98

end-Sept

¡¯98

NPLs2)

72,463

(7.5)

103,472

(6.7)

117,227

(5.6)

124,839

(5.2)

122,255

(3.9)

213,163

(5.8)

290,766

(8.6)

224,224

(7.1)

  1. ¡®96 -¡®98 figures include Housing and Commercial Bank, ¡®97-¡¯98 figures include Korea Long Term Credit Bank but do not include 5 banks that were closed under P&A during 1998

  2. Loans classified as either substandard, doubtful or estimated loss

  3. Figures in parenthesis are NPL ratios

¡¡

¡¡

¡¡

[ Strengthening of Loan Classification Standards and Provisioning Requirements]

(effective July 1, 1998)

  1. Strengthening of prudential regulation on overdue loans to incorporate international standards

- Normal : loans in arrears by less than 3 months Ü loans in arrears by less than 1 month

- Precautionary : loans in arrears by 3 months to less than 6 months Ü loans in arrears by 1 month to less than 3 months

- Substandard and below : loans in arrears by no less than 6 months Ü loans in arrears by no less than 3 months

  1. Provisioning requirements for precautionary loans will be increased from 1 % to 2 %

  2. Non-tradable securities (privately-placed bonds, commercial papers and guaranteed bills) of trust accounts will be subject to loss provisioning (provisioning for bond amortization)

¡¡

prepared by Sandy Park

Spokesperson for Foreign Press

Financial Supervisory Commission

Seoul, Korea

tel: 822-3771-5092, fax: 822-3771-5899

¡¡