Photo courtesy of Yonhap News

 

 

[Alpha Biz= Ellie Kim] Major South Korean banks, including policy lenders, are facing potential losses after Dawonsys entered court-led rehabilitation, exposing roughly KRW 240.2 billion in outstanding loans to credit risk.

According to financial industry data on May 19, total bank lending to Dawonsys stands at KRW 240.2 billion, led by Industrial Bank of Korea with KRW 143.0 billion. Other exposures include Shinhan Bank (KRW 48.8 billion), Korea Development Bank (KRW 27.8 billion), Woori Bank (KRW 13.3 billion), KB Kookmin Bank (KRW 4.0 billion), Hana Bank (KRW 2.3 billion), and NH Nonghyup Bank (KRW 1.1 billion). Including non-bank affiliates, total financial sector exposure reaches KRW 266.2 billion.

Banks have already begun building substantial loan-loss provisions, setting aside more than KRW 100 billion in the first quarter—close to full coverage of unsecured portions. IBK alone reflected around KRW 50 billion in provisions, while Shinhan, Woori, and KB Kookmin set aside approximately KRW 40 billion, KRW 13 billion, and KRW 4 billion, respectively. KDB had preemptively accumulated about KRW 20 billion in provisions last year and has since downgraded the loans to substandard status.

The situation has drawn broader attention as it highlights the risks associated with lending to mid-sized companies—even those with technological capabilities—under the government’s push for “productive finance.”

The issue gained further visibility after Lee Jae-myung publicly criticized delays in railway vehicle deliveries linked to Dawonsys, questioning whether the situation amounted to fraud.

 

 

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