Savings banks to lower bad loan ratio over three years

South Korea’s savings banks aim to nearly halve the ratio of their bad loans to their total lending by 2016 as a reactionary measure to massive bankruptcies just a few years ago, the financial watchdog said Monday.

The Financial Supervisory Service had ordered 88 local savings banks in February to submit plans on how they would lower the bad loan ratios over the three years starting this year in order to improve the financial health of the secondary lenders.

The average bad loan ratio of the savings banks stood at 21.9 percent as of end-2013. Their 2016 target is to bring it down 10.2 percentage points to 11.7 percent, according to the FSS.

The watchdog said 71 lenders set their bad loan ratio goals at below the 10 percent line by 2016, while the rest said they will reduce the ratio to between 10 percent and 20 percent.

According to the plan, the savings banks will dispose of a net 2.4 trillion won ($2.3 billion) worth of bad loans over the three years, the FSS said. (Yonhap)