[THE INVESTOR] South Korea’s top financial regulator on July 29 urged domestic lenders to stop their “indiscriminate” debt collection practices against firms that are sensitive to economic upheavals, saying excessive attempts to do so could heighten their instability.

“If lenders competitively mount pressure on firms to repay their debt, it will be difficult for them to maintain financial stability,” Financial Services Commission Chairman Yim Jong-yong said during a meeting with heads of policy and commercial banks. 


“There are a decent number of companies that can normalize their businesses if they resolve their temporary liquidity crunch through intensive self-help efforts,” he said.

To distinguish companies that are able to get back on track, creditors’ thoughtful consideration is needed, he said.

Yim’s remark comes as banks are scurrying to limit the extensions on maturing debts of ailing companies, especially for shipbuilders which are undergoing debt restructuring. As lenders try to collect debts and curb lending, corporate loans extended to large conglomerates declined by 2.9 trillion won (US$2.59 billion) as of end-June from a month earlier to 163.8 trillion won, according to the Bank of Korea.

By Park Han-na (hnpark@heraldcorp.com)