-
Jun 05, 1998
- Corporate Viability Determination and Future Action
- Corporate Viability Determinationand Future ActionUnder the Financial and Corporate Sector Restructuring Promotion Plan (announced on April 14, 1998), each bank was required to set up a corporate viability determination committee. On a voluntary basis, these committees determined the viability of corporates and under the responsibility of the main creditor banks, creditor banks consulted with each other to smooth out any discrepancies among themselves. The first set of outcomes on corporate viability determination was reported to the FSC through the Banking Supervisory Authority on June 2, 1998.Although the voluntary assessments by the banks are appreciated, the result itself is somewhat incomplete and seems to need some polishing for the following reasons ;In particular, non-performing loans of banks need to be dealt with in a swift manner, and banks need to be more aggressive toward liquidating non-viable corporates, since the injection of public funds is inevitable for normalization of financial system.① Affiliates of the biggest 5 chaebols were excluded from the determination of corporate viabilityAlthough affiliates of the 5 chaebols don’t face loan repayment problems due to the mutual guarantee and the possible assistance at the group level, the soundness of the individual corporate itself or the debt servicing capability of the individual corporate, based on the corporate’s own projects, should also be evaluated.As such, the procedure of determining corporate viability should include an assessment of future corporate viability based on a more proactive approach. Non-viable corporates are to exit from the market when deemed appropriate.② As for large corporations which benefited from cooperative loans, some creditor banks were confronted with conflicts of interest and may have postponed proactive decision making. Thus, the misgivings in the financial market could continue to linger.③ By inviting outside experts to the corporate viability determinatio
-
May 21, 1998
