FSC Press Release

(March, 5 1999)

Total NPLs at Korean Financial Institutions (at Dec., 1998)

As of the end of 1998, NPLs (categorized as loans in arrears of 3 months or more, credit extended to entities under court receivership, composition etc. or cooperative assistance loan recipients) at banks and non-bank financial institutions amounted to 60.2 trillion won, representing a decrease of 3.8 trillion won from the 64 trillion won recorded at the end of September, 1998. Among the total, 33.6 trillion won come from the banking sector, whereas the remaining 26.6 trillion won were held by non-bank financial institutions.

[TABLE 1] Total NPLs (Sept.'98 vs. Dec.'98) ¹⁾

(in trillion won)

		Total			Bank			Non-bank
		Sept.'98	Dec.'98	Chng(%)	Sept.'98	Dec.'98	Chng(%)	Sept.'98	Dec.'98	Chng(%)
Total Loans (A)		614.3	576.5	-37.8 (-6.2)	461.6	443.4	-18.2 (-3.9)	152.7	133.0	-19.6 (-12.9)
NPL2) (B)		64.0	60.2	-3.8 (-6.0)	35.0	33.6	-1.4 (-4.1)	29.0	26.6	-2.4 (-8.3)
	(B/A)	10.4	10.5	0.1p	7.6	7.6	-	19.0	20.0	0.1p

Note : 1) based on loan classification standards applied to banks, except for mutual savings and financing companies in which case NPL is defined as loans in arrears of 6 months or more

2) loans in arrears of 3 months or more, credit extended to entities under court receivership, composition etc. or cooperative assistance loan recipients

The drop in total NPLs during the fourth quarter can be attributable to efforts taken on the part of individual financial institutions as well as NPL (valuing approximately 5 trillion won) purchases made by the Korea Asset Management Corporation (KAMCO).

[TABLE 2] NPL Purchase by KAMCO during 4Q 1998

(in trillion won)

	Bank			Securities Co.	Insurance Co.	Total
		Commercial	Specialized
NPL (Amt. Purchased)	4.9	0.4	4.5	0.1	20 billion	5.0
Purchase Price	2.1	0.2	1.9	58.3 billion	3.1 billion	2.2

As bankruptcy ratios have been brought down to normal levels and the economy is starting to turnaround, new NPLs are not expected to rise to substantial levels.

[TABLE 3] NPL Breakdown by Financial Sector (end '98)

(in trillion won)

	Comm- ercial Bank	Special- ized Bank	Securities Co.	Insurance Co.	Merchant Bank	Mutual Saving & Financing Co.	Leasing Co.	Credit Unions	Total
Total Loans	300.6	142.8	7.3	38.7	28.0	22.0	25.9	11.2	576.5
NPL*	22.2	11.4	2.0	3.4	5.6	5.3	7.8	2.5	60.2

* based on asset classification standard applied to banks

Utilizing a forward-looking criteria, of which will replace the current asset classification standards by the end of this year, FSC expects total NPLs as at end-1998 to peak at 100-110 trillion won even under the worst case scenario.