Watchdog clamps down on Hanjin Group’s loans

The country’s financial regulatory agency has ordered local banks to scrutinize the general state and size of loans that they gave out to Hanjin Group, the mother company of debt-ridden Hanjin Shipping, as the fallout continues from the shipping line’s bankruptcy protection filing last month.

The Financial Supervisory Service sent out the order to the country’s major banks on Tuesday, saying the move is intended to assess the overall fiscal soundness of Hanjin Group.

“Following the fall of Hanjin Shipping, we felt the need to observe the credit conditions of the group,” an agency spokesperson said.

Industry watchers see the tighter scrutiny as a maneuver to pressure owners and Hanjin affiliates to chip in more funds to reduce the ongoing supply chain disruption caused by Hanjin Shipping’s debt troubles.

The company filed for court receivership on Aug. 31 after failing to deliver a management turnaround plan that satisfied creditors.

According to the financial regulatory agency’s preliminary research, Hanjin Group had borrowed a total of 8 trillion won ($7.14 billion) from local banks up to the end of last month. Of that money, 3.5 trillion won went to Hanjin Shipping. Roughly 4 trillion of the remaining 4.5 trillion won is believed to have gone to Korean Air, another Hanjin affiliate.

The banks that provided the loans include Korea Development Bank, Nonghyup Bank and KEB Hana Bank. The Financial Supervisory Service is expected to investigate whether the banks established secure enough measures in case Hanjin Group fails to pay off the loans.

“If the banks didn’t set up secure enough measures, the Financial Supervisory Service can require the banks to limit the amount of loans to Hanjin Group or enact other measures,” a source in the banking industry said on the condition of anonymity. “So only the preliminary investigation can add further pressure to Hanjin Group.”

The move also reflects the agency’s concerns that the collapse of Hanjin Shipping will reverberate across the financial industry beyond just banks. Investors who purchased the company’s corporate bonds have accused securities companies of failing to inform investors of the potential risks facing the shipping line.

Although Hanjin Group’s chairman, Cho Yang-ho, has coughed up 40 billion won from his own coffers to help save the shipping company, the government has been demanding that Hanjin affiliates and Cho shoulder more responsibility.

Earlier this month, the board of Korean Air refrained from voting on whether to provide 60 billion won in funds to avoid potential risks to their own operations.

BY PARK EUN-JEE, LEE TAE-KYUNG [park.eunjee@joongang.co.kr]