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Banks seen to continue support for virus-hit smaller firms

All News 08:40 August 18, 2020

SEOUL, Aug. 18 (Yonhap) -- South Korea's major banks are likely to continue to provide financial support for smaller firms and one-man operations to help them tide over the fallout from the coronavirus outbreak, industry sources said Tuesday.

The country's five key lenders -- KB Kookmin, Shinha, Hana, Woori and NH Nonghyup -- have offered those virus-hit borrowers about 39 trillion won (US$32.8 billion) in financial aid through loan rollovers or delayed interest payments since February.

The move is in line with government efforts to help small and medium-sized enterprises (SMEs) and self-employed people overcome the economic impact of the pandemic.

The lenders' financial aid is scheduled to expire at the end of September, but analysts expect those major lenders to extend their support at the request of financial authorities.

In a meeting with the heads of local financial associations last week, Financial Services Commission (FSC) Chairman Eun Sung-soo reportedly called for their cooperation in extending the move at the end of next month.

This file photo, taken April 1, 2020, shows a notice on financial aid to coronavirus-hit firms placed at a bank office in Seoul. (Yonhap)

This file photo, taken April 1, 2020, shows a notice on financial aid to coronavirus-hit firms placed at a bank office in Seoul. (Yonhap)

"Participants found common ground on rolling over loans and delaying interest payments," Eun said in a briefing after the Wednesday meeting. The FSC is trying to ensure that the extension is announced in August after hearing more opinions."

Industry watchers said those banks appear to agree on loan rollovers, but they are opposed to postponing interest payments by marginal firms, or those that can't cover interest payments with operating income.

Bank officials fear that a rise in marginal companies could result in more bad loans and be a drag on their financial health down the road, they added.

Despite their concerns, the delinquency rate for South Korean banks' won-denominated loans remains at its nadir amid record low borrowing costs.

The ratio of bank loans more than 30 days overdue stood at 0.33 percent at the end of June, down 0.09 percentage point from a month earlier, according to data from the Financial Supervisory Service (FSS). The end-June reading was the lowest since data tracking began in 2007.

The coronavirus outbreak, which began in South Korea in late January, has pounded local businesses, especially SMEs, and mom-and-pop stores by sending exports and consumer spending plummeting.

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