E-Land, Kakao, Taeyoung and Others Newly Included in Main Debt Groups... Banks to Undergo Financial Evaluation

A total of 38 companies have been designated as 'main debtor groups' that must undergo financial stability evaluations by their main creditor banks this year.

The Financial Supervisory Service announced on the 17th that it selected 38 affiliated corporate groups as main debtor groups, based on having total borrowings of 2.0717 trillion KRW or more and bank credit exposure balances of 1.2094 trillion KRW or more as of the end of last year.

The main debtor group management system is a mechanism where the main creditor bank annually evaluates the financial structure of major large corporate groups, and groups with deteriorating financial conditions enter into financial structure improvement agreements to manage credit risk. Groups that sign such agreements must independently prepare and implement rigorous financial improvement plans (self-help plans).

The Banking Supervision Regulations stipulate that affiliated corporate groups with total borrowings exceeding 0.1% of the nominal GDP two years prior and bank credit exposure balances at the end of the previous year exceeding 0.075% of the total bank credit exposure balances two years prior must be designated as main debtor groups. Because the designation is based on borrowing size, conglomerate groups are included on the list almost every year.

This year's list ranked Hyundai Motor, SK, Lotte, Samsung, and LG in order of total borrowings. Samsung, which was third last year, dropped to fourth, while Lotte moved up from fourth to third. New additions included the E-Land, Kakao, Taeyoung, Hyundai Department Store, Hanon Systems, DN, and LX groups, while Dongkuk Steel group was excluded. LX was included after separating from the LG group as an independent corporate group, and Kakao, Hyundai Department Store, and DN were newly included due to increased borrowings for investment expansion.

As of the end of April, the total number of companies belonging to the 38 main debtor groups was 6,440, an increase of 888 companies (16%) compared to last year. The bank credit exposure of the 38 main debtor groups was 322.6 trillion KRW at the end of last year, up 45.5 trillion KRW (16.4%) from the previous year. Total borrowings reached 609.7 trillion KRW, an increase of 63.4 trillion KRW (11.6%) compared to the end of the previous year. The top five groups?Hyundai Motor, SK, Lotte, Samsung, and LG?had credit exposures and total borrowings of 158.7 trillion KRW and 339.5 trillion KRW, respectively, representing increases of 14.8% and 6.1% year-on-year.

The main creditor banks plan to conduct financial structure evaluations for the 38 groups designated as main debtor groups. In particular, they intend to ensure strict evaluations by sufficiently reflecting potential risks not captured in financial statements during qualitative assessments, such as worsening performance trends and real estate project financing (PF). Groups deemed to require financial structure improvements based on the evaluation results will enter into agreements with their main creditor banks. The main creditor banks will systematically manage the credit risk of large corporate groups by regularly monitoring the implementation status of self-help plans for groups that have signed agreements.

This content was produced with the assistance of AI translation services.