Loan delinquencies hit a high

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Loan delinquencies hit a high

The delinquency rate for corporate borrowers reached a record high in June, suggesting that a growing number of companies have a hard time securing enough liquidity.

The Financial Supervisory Service said on Monday that the delinquency rate of large companies with bank loans rose to 2.17 percent as of the end of June, the highest since the financial regulator began keeping records in March 2008.

The latest rate is far higher than the previous record of 1.52 percent in March 2010. The rate marks a 0.81 percent increase over the previous month and is 1.49 percentage points higher than a year ago.

The financial watchdog cited financial hardships by the troubled STX Offshore & Shipbuilding as the primary factor driving up the delinquency rate on bank loans.

Loans are considered delinquent if principal and interest payments are late for a month or longer.

STX Offshore & Shipbuilding, a local shipbuilder, has gone into court receivership as it appears that a further cash bailout will not salvage the firm, Korea Development Bank, the company’s largest creditor, said this year.

The decision came after six months of injecting 453 billion won ($409 million) in additional liquidity into the shipbuilder. Massive layoffs and salary cuts for remaining employees were unsuccessful.

The FSS said that the cash-strapped STX alone contributed to raising the delinquency rate by 1.4 percent.

The overall delinquency rate for bank loans stood at 0.71 percent in June, down 0.03 percent compared to the previous month.

Consumer loans decreased by 0.06 percentage points to 0.31 percent in June over a month ago while the failure rate by small and medium enterprises was 0.71 percent, down 0.24 percentage points.


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