230 Companies Showing Signs of Distress This Year... Real Estate Industry Most Affected Amid Difficult Economy

The Financial Supervisory Service announced on the 23rd that a total of 230 companies were selected as signs of insolvency companies (C·D ratings) in the regular credit risk assessment results. The regular credit assessment is a system conducted annually by creditor banks to identify signs of insolvency companies, classify companies by rating according to the possibility of business normalization, and carry out follow-up measures.

Although the total number of signs of insolvency companies decreased by one compared to the same period last year, the number of large companies showing signs of insolvency increased by two to 11. The overall decrease in number is due to a reduction of three small and medium-sized enterprises, totaling 219. When conducting the regular credit risk assessment, creditor banks classify companies as large enterprises if the financial sector credit exposure is 50 billion KRW or more, and as small and medium-sized enterprises if it is less than 50 billion KRW.

By rating, the number of C-rated companies, which have a high possibility of normalization, decreased by 18 from last year to 100. Conversely, the number of D-rated companies, classified as having a relatively low possibility of normalization, increased by 17. The number of companies selected as D-rated this year is 130.

By industry, real estate had the most with 30 companies, followed by automobile (21), rubber and plastics (18), machinery and equipment (18), and wholesale and brokerage (14). Compared to last year, real estate increased by 8 companies, and automobile and professional construction industries each increased by 4 companies.

The Financial Supervisory Service pointed out that the management deterioration of some marginal companies has intensified due to sluggish business conditions caused by delayed economic recovery, rising costs, and prolonged high interest rates. However, the scale of credit exposure by banks to signs of insolvency companies stood at 1.9 trillion KRW as of the end of the third quarter this year (0.07% of total credit exposure by banks), so the impact on banking sector soundness is expected to be limited.

A Financial Supervisory Service official said, "We will resolve market uncertainties by inducing prompt workouts and insolvency cleanups for signs of insolvency companies," and added, "We will strengthen financial support for companies experiencing temporary financial difficulties, even if they are not signs of insolvency companies."