South Korean banks saw their loan default rates fall to the lowest level in 12 months in December following their enhanced efforts to clear soured loans ahead of year-end book closings, the financial regulator said Monday.

   Loans overdue by one day or more reached 0.91 percent, or 9 trillion won ($8 billion), of the total lending held by 18 local banks as of the end of December, sharply down from 1.24 percent, 12.4 trillion won, a month earlier, the Financial Supervisory Service (FSS) said in a statement.

   The December reading marks the lowest level since 0.74 percent in December last year, the FSS added.

   The sharp drop in overdue loans came as banks beefed up clearing of delinquent loans before they closed their yearly books at the end of 2010, the FSS said.

   Banks saw 2.6 trillion won in loans go sour last month, the same amount shown in the previous month, while their disposal of delinquent loans doubled to 6 trillion won on-month, according to the FSS.

   The default rate on corporate loans reached 1.32 percent in December, down from 1.91 percent a month earlier, with the corresponding ratio on household loans also declining to 0.52 percent from 0.59 percent, the FSS said. (Yonhap News)