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Businesses, households borrow W75tr in loans during COVID-19 period
By Jung Min-kyungPublished : May 31, 2020 - 15:20
T
he outstanding loans extended to local companies and households here increased by a combined 75.4 trillion won ($73 billion) from February to April, when the economic risks stemming from the novel coronavirus pushed them to the brink, data showed Sunday.
The figure has increased nearly triple on-year, rising from when businesses and households borrowed a combined 21.9 trillion won, according to data compiled by the Bank of Korea and the policymaking Financial Services Commission.
The outstanding loans to local businesses and households jumped from 877.5 trillion won to 929.2 trillion won and 892 trillion won to 915.7 trillion won, respectively, from end-January to end-April.
Of 51.7 trillion won in fresh loans extended to companies in the cited period, 29.9 trillion won -- more than half -- was extended to small and medium-sized enterprises, reflecting their vulnerability amid financial crises. The remaining 21.7 trillion won was extended to conglomerates or large corporations, in a rare move for such firms. Last year, in the same period, loans extended to large businesses had declined by 1 trillion won on-year.
The local corporate bond and commercial paper markets have slowed down in recent months, and companies have been hit with liquidity issues.
This pushed the central bank and the government to jointly create a special purpose vehicle, which would allow them to directly purchase commercial paper. Commercial papers are a type of short-term debt companies use to fund themselves.
The outstanding loans extended to households amounted to 23.7 trillion won in from end-January to end-April, which was double the corresponding figure for the same period last year.
“As we can observe from the latest situation, companies and households will have to further weather the storm with loans,” said Cho Young-moo, a researcher at LG Economic Research Institute.
“This could lead to a mass delay in loan repayment and drops in the local financial institutions’ credit ratings,” he added.
By Jung Min-kyung (mkjung@heraldcorp.com)
he outstanding loans extended to local companies and households here increased by a combined 75.4 trillion won ($73 billion) from February to April, when the economic risks stemming from the novel coronavirus pushed them to the brink, data showed Sunday.
The figure has increased nearly triple on-year, rising from when businesses and households borrowed a combined 21.9 trillion won, according to data compiled by the Bank of Korea and the policymaking Financial Services Commission.
The outstanding loans to local businesses and households jumped from 877.5 trillion won to 929.2 trillion won and 892 trillion won to 915.7 trillion won, respectively, from end-January to end-April.
Of 51.7 trillion won in fresh loans extended to companies in the cited period, 29.9 trillion won -- more than half -- was extended to small and medium-sized enterprises, reflecting their vulnerability amid financial crises. The remaining 21.7 trillion won was extended to conglomerates or large corporations, in a rare move for such firms. Last year, in the same period, loans extended to large businesses had declined by 1 trillion won on-year.
The local corporate bond and commercial paper markets have slowed down in recent months, and companies have been hit with liquidity issues.
This pushed the central bank and the government to jointly create a special purpose vehicle, which would allow them to directly purchase commercial paper. Commercial papers are a type of short-term debt companies use to fund themselves.
The outstanding loans extended to households amounted to 23.7 trillion won in from end-January to end-April, which was double the corresponding figure for the same period last year.
“As we can observe from the latest situation, companies and households will have to further weather the storm with loans,” said Cho Young-moo, a researcher at LG Economic Research Institute.
“This could lead to a mass delay in loan repayment and drops in the local financial institutions’ credit ratings,” he added.
By Jung Min-kyung (mkjung@heraldcorp.com)
