According to a KEXIM report obtained by Rep. Shim Jae-cheol of the ruling Saenuri Party, the bank’s subprime loans went from 555 billion won (US$497.73 million) in 2012 to 5.4 trillion won at the end of August this year.
Of the 5.4 trillion won, 4 trillion won was shown to have been lent to companies in the shipbuilding industry.
Citing reports from the Korea Development Institute and the Organization for Economic Cooperation and Development, Shim said that the state-run bank’s actions have hampered the industry’s restructuring.
In a 2014 report, the KDI said that increased government support could allow faltering companies to remain in the market, while avoiding restructuring and become “zombie” companies.
According to Shim, the OECD also pointed out similar issues for large shipbuilders saying that the safety net provided by the government would push them into moral hazard, and act as a disincentive for making necessary structural changes.
By Choi He-suk (firstname.lastname@example.org)