Corporate Credit Risk Soars to 4-Year High

      January 07, 2014 12:59

      The credit risk of major conglomerates soared to a four-year high during the fourth quarter of last year.

      According to the Bank of Korea on Monday, the credit risk index for big businesses came in at 16. The last time the index soared to that level was at the height of the global financial crisis in 2009.

      The index ranges from -100 to 100, and the higher the figure the higher the risk financial institutions face of failing to recoup their loans.

      To derive the figure, the BOK surveyed loan officers at 36 banks and credit card companies in December last year and had them rate the risk of corporate credit default over the next three months on a scale of one to five, with one signifying low risk and five high.

      The index soared to 28 in the fourth quarter of 2008, just after the global financial crisis erupted, but fell to negative territory in 2011. However, it rose to between six and nine since the third quarter of 2012 and stood at nine in the third quarter of last year.

      Suh Jeong-eui at the BOK said loan officers began feeling increased psychological pressure as financial risks of merchant marine companies, shipbuilders and construction firms came to the fore.

      "Domestic and overseas uncertainties, including a weak yen and fragile financial conditions in some big businesses, will continue, causing the corporate credit risk level to remain about the same in the first quarter of this year," Suh said.

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