South Korean banking industry will step up the oversight of bank loans to SMEs, a week later the country’s chief financial regulator stated that intense competition may result in growing loan defaults.
The Financial Supervisory Service reported that loan reviews to smaller enterprises will be conducted daily, an information-
"The government is trying to preempt the possible risks associated with bank lending to smaller companies, which are vulnerable to economic downturns," stated Ku Yong Uk, an analyst at Daewoo Securities in Seoul. The 18 banks of the country had cumulative outstanding loans of over $340 Billion to SMEs as of 31, March 20007, high by around 4.74% from December 31, 2006.
In November last year, The Bank of Korea, for the first time in nearly 17 years, increased the reserve requirements for short-term deposits on banks. The motive behind the move was to control lending, that has played a major role in sending housing prices northwards. As per the financial regulator, delinquency ratio (of bank loans to small companies) had reached around 1.24% as of March end 2007 from over 1% in end 2006.
The report “South Korean Banking Industry Analysis (2007-2011)” by RNCOS has found South Korean banking industry as very aggressive in providing loans to public as its loan-deposit ratio has moved up by over 13.9% during 2001-2006, surpassing 88.5% at 2006 end from nearly 75.37% in 2001. This indicates that a major share of deposits is being employed in meeting the lending requisites.
The market research report provides a comprehensive overview of South Korean banking industry including economic condition of the country, its financial system, types of banks, and industry performance.
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