South Korea’s top financial regulator on Friday asked heads of banks not to recklessly collect debt from the financially-troubled shipbuilders such as Daewoo Shipbuilding & Marine Engineering.
Zhin Woong-seob, governor of the Financial Supervisory Service, directly made such request at a meeting with CEOs of 15 commercial banks including Shinhan, Kookmin, Woori and KEB Hana, after thanking them for cooperating in the rescheduling of debt for DSME, the FSS said.
The world’s largest shipbuilder by order backlog successfully earned a court approval on Thursday evening to receive a fresh 2.9 trillion won ($2.55 billion) loan from creditors led by the Korea Development Bank and the Export-Import Bank of Korea. For the shipbuilder, commercial lenders had previously agreed that they would swap 80 percent of debt to equity and extend the maturity of the remaining debt by five years.
“The governor asked banks not to unanimously and recklessly collect debt from shipbuilders and their subcontractors without considering their management situations, just because the overall shipbuilding industry is having a difficult business environment,” the FSS said in a statement.
“He requested the banking industry’s careful approach to prevent difficulties in the shipbuilders’ financial provisions.”
DSME is expected to make a turnaround in the first quarter this year, after making losses for the past four consecutive years, its CEO Jung Sung-leep told bondholders earlier this week.
Two other big shipbuilders Hyundai Heavy Industries and Samsung Heavy Industries are also expected to continue to stay in black in the first quarter, mainly due to on-going restructuring, news reports said.
Meanwhile, Zhin also called for the banks to be more specific in evaluating credit risks of companies for efficient corporate restructuring and expand detailed credit evaluations on those at risk in the shipping industry. Banks have to submit their credit evaluations on the companies in the restructuring-subject industries to the regulator by July.
He also discussed recent moves by some banks to reduce the number of branches amid the expansion of digital transactions. The number of local bank branches had dropped to 7,150 as of the end of 2016, from 7,329 a year earlier, according to FSS data.
For people who still need human banking services such as older people, he urged lenders to come up with alternative measures not to marginalize them. Such measures include flexibly operating branches and movable branches for senior citizens, the FSS said.