Why Are 41 Conglomerates in South Korea Under Financial Scrutiny?
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Synopsis
In an unprecedented move, South Korea's financial authority has put 41 conglomerates under scrutiny for their soaring debts. With the highest number of indebted groups in a decade, this situation poses serious questions about the financial stability of these corporations and the broader economic impact. Discover the implications of this oversight.
Key Takeaways
- 41 conglomerates under financial monitoring.
- Debt levels exceed 2.4 trillion won collectively.
- Highest number of indebted groups in a decade.
- Financial watchdog aims to mitigate credit risks.
- New reference rate system to enhance financial efficiency.
Seoul, May 29 (NationPress) The financial regulator of South Korea announced on Thursday that it has put 41 heavily indebted conglomerates under intensified monitoring aimed at managing their debt levels.
As reported by the Financial Supervisory Service (FSS), these conglomerates, which collectively owe over 2.4 trillion won (equivalent to $1.74 billion) to local banks, have been classified as significant corporate debtors this year.
This figure represents the highest concentration of indebted conglomerates in a decade, increasing from 36 such groups last year, according to Yonhap news agency.
Among the new entrants to this list are Hyundai Department Store, Booyoung, and seven others, while Kumho Asiana, SM, and two others have been removed, as indicated by the FSS.
As of the end of 2024, the total loans outstanding for the 32 business groups reached 371.8 trillion won, reflecting an increase of 33 trillion won, or 9.7 percent, year-over-year, the FSS reported.
The FSS stated, "Principal creditor banks will assess the financial health of these 41 conglomerates, entering into restructuring agreements with those that are financially at risk to systematically address credit risks."
In a separate announcement, South Korea’s financial authority also revealed plans to enhance the adoption of a new reference rate for transactions among major financial entities starting in July, aligning with global market trends.
In 2021, the Financial Services Commission and the Bank of Korea (BOK) introduced the Korea Overnight Financing Repo Rate (KOFR) to replace the long-standing 91-day Certificate of Deposit (CD) rate in the derivatives market. However, many financial institutions still use the CD rate as their benchmark.
To facilitate the adoption of the KOFR, the BOK and 28 leading financial institutions have committed to ensure that at least 10 percent of interest rate swap transactions will utilize this new rate starting in July.
The goal is to have this figure exceed 50 percent by 2030, as stated by the regulator.
Point of View
I believe it is crucial to monitor the financial health of our major conglomerates. The recent oversight by the financial watchdog signals a proactive approach to safeguarding our economy. This heightened scrutiny will not only help manage corporate debts but also protect the interests of stakeholders and promote financial responsibility across the business sector.
NationPress
10/09/2025
Frequently Asked Questions
What triggered the scrutiny of the conglomerates?
The scrutiny was triggered by the alarming debt levels of these conglomerates, which collectively owe over 2.4 trillion won to local banks.
How many conglomerates are currently under watch?
Currently, 41 conglomerates are under close monitoring by South Korea's financial watchdog.
What measures will be taken by the financial watchdog?
The financial watchdog will evaluate the financial stability of the conglomerates and may enter restructuring agreements with those experiencing financial distress.
What is the Korea Overnight Financing Repo Rate (KOFR)?
The KOFR is a new reference rate introduced to replace the long-standing 91-day Certificate of Deposit rate in financial transactions.
What impact could this scrutiny have on the economy?
This scrutiny can lead to improved financial stability by ensuring that highly indebted conglomerates manage their debts effectively and responsibly.
