Automatic exit to ailing companies

From now on, ailing companies will be closed automatically. In addition, public funds will not be injected into the ailing or incompetent banks, and such banks will be shut down or merged into other financial institutions.

Lee Keun-Young, chairman of Financial Supervisory Commission, revealed Jan. 18 such intentions in the 2001 Top Management Seminar breakfast meeting, which was hosted by the Federation of Korea Industries at the Shilla Hotel.

¡°Until now, banks put emphasis on securities and sales when reviewing companies for credit, but from now on, they will focus on profitability,¡± chairman Lee explained. ¡°When financial institutions assess companies¡¯ credit standing, they will focus on Information Technology investment, Research and Development (R&D) and renovation of corporate governance structure, as well as profit and cash flow.¡±

Regarding distressed financial institutions, he said. ¡°Without more injections of public funds, Purchase of assets and Assumption of liabilities (P&A) method will be applied to them according to the immediate rectification criteria.¡±

With regard to non-banking sector restructuring, he explained, ¡°Merchant banks will specialize in intermediation of corporate funds after they are transformed into corporate financing and investment experts, and mutual saving and finance will be altered into regional saving banks through regional integration.¡±

On the other hand, about the criticism on mishandling ailing companies including Hyundai Engineering and Construction, he said: ¡°Simply due to temporary liquidity difficulty, every company should not be expelled out of the market. That is not the case with market principle.¡±