Press Releases - Financial Services Commission

Press Releases

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Jul 01, 1998

Strengthening of Loan Classification and Provisioning ...

The Banking Supervisory Authority in accordance to MOU with IMF amended related regulations to enhance prudential regulation on commercial banks.The following details the core contents of the amendment that will go into effect July 1, 1998.- Strengthening of prudential regulation on overdue loans to incorporate international standardsClassificationPrior to AmendmentAmended CriteriaNormalloans in arrears by less than 3 monthsloans in arrears by less than 1 monthPrecautionaryloans in arrears by 3 months to less than 6 monthsloans in arrears by 1 month to less than 3 monthsSubstandard and belowloans in arrears by no less than 6 monthsloans in arrears by no less than 3 months- Provisioning requirements for precautionary loans will be increased from 1% to 2%- Non-tradable securities (privately-placed bonds, commercial papers and guaranteed bills) of trust accounts will be subject to loss provisioning (provisionsing for bond amortization)
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Jun 29, 1998

FSC Press Release upon Ailing Bank Resolution

■ Final assessment results of the Bank Appraisal Committee were reported to the Financial Supervisory Commission on June 28, 1998. A special meeting of the Financial Supervisory Commission was held at 7:00 am on June 29, 1998 and utilizing input from the committee decided the following;○Banks whose rehabilitation plans are deemed feasible, such as Cho Hung Bank, Commercial Bank of Korea, Hanil Bank, Korea Exchange Bank, Peace Bank of Korea, Kangwon Bank and Chungbuk Bank each received conditional approval of rehabilitation plan and are required to submit an implementation plan containing strong management improvement plans by the end of July'○Banks whose rehabilitation plans are deemed not feasible, such as Dong Hwa Bank, Dongnam Bank, Dae Dong Bank, Chung Chong Bank and Kyungki Bank each received disapproval of rehabilitation plan and will have to transfer their assets and liabilities to Shinhan Bank, Housing Commercial Bank, Kookmin Bank, Hana Bank, Koram Bank, respectively■The government will exert utmost effort in minimizing clients' inconveniences during the course of bank resolution by implementing following measuresNot only payment settlement and deposit repayment businesses but also businesses of overdraft and bill discount will be carried out as normalIn order to restore financial market stability as soon as possible, liquidity situation will be improved and credit extention toward corporate clients of resolved banks will be enhanced1. Progress to-date■Submission of rehabilitation plans (April 30, 1998)○12 banks with BIS ratio that fell short of 8% as of December 1997 were required to submit rehabilitation plans■Accounting firms' evaluation on rehabilitation plans (May 1 - June 8, 1998)○In accordance to evaluation criteria agreed upon with the IBRD, the feasibility of the following elements were evaluated - capital adequacy, recapitalization plan, asset quality classification, reduction plan for risky assets, cost reduction scheme, managemen
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May 21, 1998

Chairman`s Speech at Seoul Foreign Correspondent`s Club

Ladies and gentlemenIt is my honor to have this opportunity to share with you the framework and the key elements of the restructuring package for the financial and corporate sectors in Korea.As you know, Korea is currently facing crucial challenges. At the core of them lies the successful installation of new rules into the Korean economy.In the past, the government-led economy has had serious market imperfections, in particular, deep rooted problems with capital resource allocations and business opportunities.Past industrial policies has traditionally meant capacity-driven policies for the largest companies and have created a vigorous demand for new capital in the rapidly growing economy.In other words, many Korean industries have experienced a short supply of monetary capital. This has been the result of commercial banks focusing on funding government-led projects rather than lending to competitive markets.This is evident from the long lines of borrowers knocking on the doors of the banks. This tradition has distorted the fair allocation of credit.Only large companies with sufficient collateral had been the beneficiaries of the limited credit resources while small to medium sized companies had been subject to a constant credit crunch.In turn, large companies have been active in expanding their production capacity and diversifying into new and often non-competitive businesses with borrowed capital. Thus, high leverage and thin margin are common characteristics of the Korean companies.As a result, the non-performing loans increased astronomically and the Korean economy lost its credit from the international financial circles.To restore as quickly as possible international credibility in Korea, the government will gather all of its capacities to execute the restructuring programs.Ee strongly believe that any delay in implementation will increase the cost of restructuring exponentially and decrease our chances of a prosperous future. Restructuring is not a matter of ch
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