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Growing number of households, companies suffer severe financial distress
2012.10.31 18:38:24 | 2012.10.31 18:57:15

[Growing number of households, companies suffer severe financial distress ] 기사의 본문 이미지

A growing number of South Korean households and companies, the nation’s two major economic pillars, are at risk of insolvency, warned the Bank of Korea (BOK).

“As housing prices are plummeting, households who took out home-backed loans are becoming less able to repay their loans”, according to a report released by the BOK Wednesday. “In the case of self-employed people, most of whom are low-income earners, their combined amount of debts stood at as much as 4.3 trillion won ($3.9 billion).” To put it differently, each household holds debt worth 95 million won.

The amount of home-backed loans worth more than 60 percent of the value of their collaterals in violation of the LTV (loan-to-value) ratio cap guideline is estimated at 35 trillion won as of the end of March. As those debts are being serviced but not reduced, they are deemed at higher risk of default. In case of a 20 percent decline in the market value of housing collaterals, the amount of those risky debts will triple to 93 trillion won.

Self-employed people are increasingly heavily indebted as they take the biggest hit from the economic recession and thus lose available means to make their ends meet.

Korea ranked second place among 26 OECD member countries in terms of the share of self-employed people. However, the nation’s traditional service sectors including the wholesale, retail, accommodation and food industries have the second lowest productivity.

Even Korea’s conglomerates cannot be safe from the fallout of the prolonged economic recession.

“Local firms suffering critical financial distress are at greater risks of going bust due to worsening corporate profitability,” according to a report released by the Bank of Korea (BOK) Wednesday. “The financial instability caused by a rising number of conglomerate-owned firms on the edge of going bankruptcy can possibly spread to other affiliates of conglomerates.”

Marginal firms refer to companies whose interest coverage ratio (ICR) is below 100 percent for three consecutive years and those observing negative capital flows from operating activities. In other words, marginal firms are those who cannot cover their interest expenses with their operating profits.

The proportion of marginal firms out of the total listed Korean companies markedly grew from 14 percent at the end of 2010, 15 percent at the end of 2011 to 18 percent in June of 2012, explained the BOK.

The share of large companies jumped from 11 percent at the end of 2010 to 15 percent as of June 2012. That of small- and mid-size businesses also went up from 17 percent to 21 percent during the same period.

Marginal firms’ capability of repaying debt is increasingly worsening.

As of the end of June, short-term borrowings took up 78 percent of marginal firms’ borrowing channel, which is two times higher than those of financially healthy companies (42 percent). Their current ratio which assesses companies’ liquidity, dropped from 91 percent at the end of 2011 to 82 percent in the first half (H1) of this year.

Marginal firms’ reliance on short-term borrowings grew but their capability of repaying short-term debts is gradually worsening, the BOK worried.

Notably, an acute rise in the number of marginal firms was visible among affiliates of conglomerates.

The number of marginal firms that belong to conglomerates in Korea has been on a steady rise from 19 at the end of 2010, 22 at the end of 2011 to 23 as of June 2012

[Written by Beomjoo-Jeon - Jieun Lee / edited by Soyoung Chung]


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Korean View
빚·빚·빚!가계도 기업도 `부실 늪`
`깡통전세` 26%…이자 못버는 기업 27%
박재완 장관 "이번 위기 5~6년 더 갈것"

한국 경제의 두 축인 가계와 기업이 모두 빚더미 부담에 눌려 부실화되고 있다는 한국은행의 경고가 나왔다. 전세보증금을 감안하면 집을 팔아도 빚을 갚지 못하는 `깡통` 전세주택 비중이 26%를 넘었고, 돈을 벌어 빚을 감당하지 못하는 대기업도 27%에 달했다.

한국은행은 지난달 31일 국회에 제출한 `금융안정보고서`에서 "집값이 급락하면서 가계의 주택자금대출 부담이 커지고 있다"며 "특히 저소득층이 다수 분포하고 있는 자영업자의 경우 430조원의 부채를 지고 있다"고 발표했다. 가구당 9500만원의 빚을 지고 있는 셈이다.


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