South Korean banks forecast higher corporate credit risks

South Korean banks projected the credit risks of South Korean companies to rise in the third quarter due to sluggish domestic demand and the strengthening of the South Korean won, central bank data showed Wednesday.
An index measuring larger companies' credit risks came in at 19 for the July-September period, the highest level since the first quarter of 2009 when it reached 19 in the aftermath of the global financial crisis, according to the quarterly survey of 16 local banks conducted by the Bank of Korea. Compared with the previous quarter, it rose by 3 points.
The on-quarter rise was credited to worries that the won's appreciation against the U.S. dollar may hurt profitability of exporters and credit crisis of several conglomerates, South Korea's News (Yonhap) reported.
"The level did rise to the highest level since the first quarter of 2009, but it does not translate as a significant deterioration since the index ranges from a minimum of minus 100 to a maximum of 100," a BOK official said.
Credit risks refer to the likelihood of borrowers being unable to repay debt. A reading above zero means that the degree of credit risks is high.
The credit risks of small and medium-sized companies came in at 31, compared with 25 in the previous quarter.
The BOK said sluggish domestic demand heightened lingering risks for industries that are sensitive to the economy, such as property leasing and service industries.
The overall credit risk, including large, small and medium-sized firms as well as households, reached 27 for the third quarter, up from 22 in the previous quarter. Household credit risks stood at 22.