NPL debate hurting market transparency

The Korean Economic Research Institute`s (KERI) report that the non-performing debt held by financial institutions is 20~30 trillion won greater than the figure the government previously announced has created a stir in the market.

The Financial Supervisory Service (FSS), which declared only 2 weeks ago that no hidden non-performing loans (NPL) existed, has sent an official letter of inquiry to KERI. The FSS originally considered taking sterner measures, but has remained silent on the issue since the 20th.

The head of KERI, Jwa Seung-Hee, did not hide his discontent with the fact that the report prepared to help the government has in fact done just the opposite. When asked for his response to the FSS`s comment that the report was of university student level, he did not reply, apparently feeling the burden of going against the government.

As the parties involved in the NPL debate are lying low, the matter seems to have died down. In spite of this, market transparency has once again suffered a heavy blow.

Two methods were used to determine the NPL volume in the KERI report. FSS accused one of the methods of being university-level. However, the other method also results in a figure 20~30 trillion won higher than the government figure of 91 trillion won.

In relation to the double calculation of payment guarantees, a KERI official said that as the amount was insignificant, they were excluded. The FSS asserted that companies unable to properly pay interest should be excluded from loan evaluations. However, in view of the lack of morals and inability of the management supervision groups dispatched to workout companies, this claim cannot be accepted.

The NPL calculation method used by KERI is not new. Still, the interest in this allegedly university-level report indicates the government`s statistics are no longer credible. Financial authorities contend the only way for the government to recover its credibility is to scrupulously analyze the difference in its own figures and those of the private sector.