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To: DJBEINO who wrote (3861)	8/29/1998 3:08:00 PM
From: DJBEINO	Respond to of 9582

Loans Not to Be Given to Ailing Chaebol Units 08/28 The Financial Supervisory Commission (FSC) said yesterday that from next month it would not allow banks to extend new loans to ailing units of the nation's five largest conglomerates, which are blamed for their reckless investments. The FSC move is aimed at putting strong pressure on the debt-laden family-owned chaebol to get rid of their overcapacity under the government-initiated formula of swaps of businesses among the top conglomerates. ''We plan to block troubled units of chaebol from getting bank loans if they are found to have lost their competitiveness because of reckless overexpansion,'' said Lee Hun-jai, chairman of the FSC. Lee reported the plan to the National Assembly standing committee on financial and economic affairs. Accounting firms are now conducting analyses on the five biggest business groups at the request of the financial supervisory agency in order to bring light to their reckless investment drives in past years. The five groups are Hyundai, Samsung, Daewoo, LG and SK. The FSC has targeted auto, semiconductor and oil refinery industries for restructuring in a bid to eliminate overcapacity. Under the FSC plan, troubled units of the top-five chaebol will have to work out measures to restructure their overextended businesses. The targeted chaebol firms are also required to map out measures to improve their financial structures, which will be approved by their main creditor banks by the end of this year. Industry sources predicted that the restructuring of unprofitable and overinvested chaebol units will gather speed when a successful bidder for insolvent Kia Motors Corp. and its sister firm Asia Motor Co. is selected in an international auction Sept. 1. The financial watchdog has also decided to inject public funds into the nation's seven weak banks only if they merge with other banks. The government support is supposed to be used to boost the 8 percent capital adequacy ratio set by the Bank for International Settlements (BIS). In addition, the FSC plans to participate in capital increases of 13 sound banks, which were found to have failed to meet the 8-percent BIS requirement. In return for government equity capital, the banks will have to implement more radical restructuring and recapitalization plans.