Financial Institutions Still Have W50 Tril. in Bad Loans Local Financial Institutions Were Reported to Still Have 50 Trillion Won in Non-Performing Loans, Although the Government Wrote off a Total of 98 Trillion Won in Such Loans over the Past 2 1/2 Years

Article excerpt

In a seminar held in Chonan, Chungchong-namdo, yesterday, the Korea Institute of Finance (KIF) said that financial institutions currently have 50.2 trillion won in bad loans, accounting for 8.1 percent of their 621.4 trillion won in total credit.

KIF researcher Dr. Ko Song-soo said that the bad loans ratio only declined to 8.1 percent from 10.4 percent in 1998, despite the fact that the government injected public funds into banks and non-banking institutions to dispose of nearly 100 trillion won worth of bad debts.

Ko expected bad loans to increase further this year due to the prolonged economic slump and a lack of efforts by financial institutions to cover their massive losses arising from non-performing loans.

He added strengthened standards for classifying bad loans and the collapse of the Daewoo Group also led to a failure by financial institutions to sharply reduce their problematic loans.

``What's more serious is that financial institutions and the government have made little effort to attract more investors to take over their bad assets and create a market to trade non-performing loans,'' Dr. Ko said.

He recommended that the government beef up real estate investment trusts (REITs) and promote the issuance of mortgage-backed securities (MBS).

The financial expert also called for tax breaks for real estate investment companies in order to help financial institutions sell off their bad assets. …