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Jun 05, 1998
- Results of Corporate Viability Assesstment
- 1. Progress to-date of Corporate Viability AssessmentA total of 313 corporates, including corporates in 11 business groups that are recipients of cooperative assistance, as well as troubled corperates belonging to the big 64 business groups were assessed in the recent corporate viability assessmentAs for the corporates belonging to the top 5 business groups, they were excluded at first as they were deemed to not have problems in connection with repayment of liabilities. However, under the judgement that the assessment of those corporates in accordance to the soundness of the individual corporate is needed as well, they were added onto the list of corporates to be identifiedCorporate Viability Assessment Committees at each bank came up with internal assessment results by June 13 and following a period of reconciliation to resolve discrepancies among banks the final results were conceived on June 17The banks’ assessment process was based on the principle of voluntary decision-making and after a sufficient level of discussion between members of the assessment committees, objective measures such as voting were utilized to arrive at final resultsIn principle, criteria for viability assessment was left for each bank to decide on their own. However, there were some common criteria. For example, financial standings, capacity to create profit-making opportunities or capabilities to endure financial costs were commonly considered throughout the evaluation process.- Instead of evaluating a corporate’s viability under the current high interest rate environment, normal interest rate levels were applied when calculating a corporate’s future value,- Much weight was placed on the corporate’s future value when it came to making reconciliation toward the viability of a certain corporate during deliberation sessions between banks.2. Results of Corporate Viability AssessmentThe recent assessment revealed that 55 corporates, which represent 17% of total number of corporates subj
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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
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May 21, 1998
