S.Korean banks to tighten lending to big companies in Q3: BOK survey

South Korean banks are expected to tighten lending to big corporations during the July-September period, boosting corporate credit risks amid the ongoing restructuring on trouble shipbuilders and shipping firms, a central bank survey showed on Tuesday.

The lending attitude index stood at minus 19 in the third quarter, marking the lowest since the fourth quarter of 2008 when the global financial crisis erupted, according to the Bank of Korea (BOK) survey of 172 banks and non-bank lenders conducted between May 30 and June 10.

The negative figure means more lenders replied the tightening of lending standards than those seeking to ease loan standards.

The reading for big corporations tumbled to minus 25 in the third quarter, down 7 points from the previous quarter. It reflected growing fears among lenders over the ongoing corporate restructuring in the shipbuilding and shipping industries that would increase uncertainties of the economy.

The government has led the country's three main shipbuilders to cut back on workforce by 30 percent and reduce overcapacity by 20 percent by the end of 2018.

The nations' top two shipping lines are struggling with ship-leasing companies to cut charter rates, a requirement by creditor banks to provide more loans. Major shipbuilders and shipping liners have struggled with mounting debt after years of losses from the slump in global trade, plunging new orders and low crude oil prices.

The lending attitude index for small companies was unchanged at minus 19 in the third quarter compared with the previous quarter. The index for household loans shed from minus 25 in the second quarter to minus 28 in the third quarter. Credit risks were expected to rise in the third quarter. The credit risk index for big corporations increased from 28 in the second quarter to 38 in the third quarter, marking the highest since the BOK began compiling the data in 2002. The credit risk index for small companies rose from 34 to 38 in the cited period, while the reading for households gained from 22 to 25.