The state-run Export-Import Bank of Korea has come under fire for failing to properly evaluate companies’ financial soundness when giving out loans or credit approvals.
With over 100 of its loan-borrowers having gone out of business, the state-run policy bank is now at the risk of losing up to 1.3 trillion won ($1.2 billion).
Among companies that have taken loans from the bank since 2011, a total of 102 have entered court receivership, according to data released Wednesday by Rep. Park Won-suk, a lawmaker of the minority Justice Party.
Eximbank approved 1.3 trillion won in loans and credit guarantees for those companies, as of their court receiverships.
Industry observers predict that only 400 billion won or so may be recollected.
The average debt recoverability rate is about 30 percent of the total amount, excluding collateral. But the figure is expected to be as low as 10-20 percent for Eximbank as most of its transactions were credit loans, according to officials.
The bank has written off 35.8 billion won in credit balances for 13 of the 102 companies, classifying their debts as irrecoverable.
Also, it has implemented a debt-for-equity swap amounting to 20.6 billion won for 17 companies that are highly unlikely to pay back within the due period.
The outstanding 1.7 trillion won includes 520.9 billion won that the bank offered in loans and credit guarantees to the Keangnam Enterprises. Eximbank was the largest creditor to the disputed company previously owned by the late Sung Woan-jong.
But the bank’s nonperforming loan balance may increase further as bankrupt companies such as Moneual have been excluded from the count, according to the lawmaker.
Last year, the home appliance-maker was found to have borrowed over 3 trillion won in loans by submitting fake export documents and bribing key bank officials. Korea Eximbank had approved 113.5 billion won to the fraudulent company.
“Korea Eximbank’s name is mentioned in every major case of problematic loans,” Rep. Park said.
“Even considering that its role as a state-run bank is to lend money to local firms with potential, its credit evaluation process needs to be thoroughly reviewed.”
By Bae Hyun-jung (tellme@heraldcorp.com)
