Financial watchdog notifies criteria for liquidation; eviction to be confirmed this month

The fate of 150-200 big businesses with debt credit ratings of precautionary or below forward-looking criteria (FLC) for asset classification will be determined within this month. In the companies that are classified as nonviable and ordered to convert equity, majority shareholders or owners will be deprived of their managerial rights through the reduction of equity. In addition, banks that attempt to save the nonviable enterprises by concealing non-performing loans (NPLs) will see their managers replaced or face other penalties.

The Financial Supervisory Service confirmed Thursday the credit crisis appraisal criteria to determine nonviable enterprises and notified banks of the guidelines through a meeting of bank officials in charge of lending. In line with this, the banks will form credit assessment committees with some 10 members including outside specialists to work out detailed criteria to measure credit crisis ratings, and classify viable and nonviable companies for either their liquidation or recovery. In accordance with the credit ratings, for enterprises that are assessed as hopeful for recovery or have few liquidity problems, the creditor banks are responsible for supplying funds to rehabilitate them. On the other hand, for businesses that have structural liquidity problems, measures should be worked out for the rehabilitation of those that are considered able to survive through self-rescue steps such as conversion of equity.

However, those enterprises for which recovery is deemed impossible should be liquidated by such means as placing them under court receivership, mergers and acquisitions, sell-offs or transfers to corporate restructuring companies.