Credit Risk
A gauge of Korea’s corporate credit risk in the fourth quarter of last year climbed the most in four years. Due to the weak yen and the vulnerable financial structure of some of the large companies, the credit risk is projected to be even higher.
According to the results of a survey on financial institutions’ lending activities released by the Bank of Korea (BOK) on January 6, the credit risk index of Korea’s large companies in Q4 2013 is 16. The number is the highest since the second quarter of 2009, when companies experienced financial difficulty because of the global financial crisis.
The index ranges from -100 to 100. It means that as the number is up, lending to large companies is more dangerous.
The country’s corporate credit risk index soared to 28 in Q4 2008 and gradually decreased to the negative level in 2011. However, it increased again and has stayed in the range of 6 to 9 since the third quarter of 2012.
An official at BOK said, “The credit risk of large companies in the first quarter of this year is expected to maintain the same level as the last quarter, owing to internal and external factors such as the weak yen and worries about the vulnerability of some large companies’ financial structure.”