BOK sees signs of stabilization, but wary on full recovery

Published : Apr 22, 2016 - 11:22 Updated : Apr 22, 2016 - 11:29

The chief of South Korea’s central bank said Friday that uncertainties in the local and global financial markets have eased but whether such improvements will lead to a full economic recovery remains to be seen.

“Recently, the local financial market has become a bit more stabilized following the disappearance of some woes in the global financial market, and we are beginning to see some positive signs of recovery,” Bank of Korea Gov. Lee Ju-yeol said in a monthly breakfast meeting with officials from top commercial banks.

“But we still have to see if these signs of improvement will actually lead to recovery,” he added.

Lee also expressed concerns over a possible deterioration in the profitability and overall fiscal soundness of local banks, noting their net interest margin appears to have shrunk.

NIM is a key barometer of profitability that measures the difference between the interest income of a financial organization and the amount of interest it paid.

Local lenders have witnessed a dip in their interest income as BOK has kept its policy interest rate at a record low of 1.5 percent since June 2015 to help rejuvenate the economy.

Lee said local banks may face additional difficulties when government-led corporate restructuring gets under way.

The government has already named five industrial sectors that will be subject to intensive restructuring. They are the construction, petrochemicals, shipbuilding, shipping and steelmaking industries.

(khnews@heraldcorp.com)