The government has decided to designate and manage 10 public institutions whose financial conditions have deteriorated as financial risk institutions. As public institutions’ debt has increased and concerns regarding the financial soundness of each institution growing due to rising oil prices and interest rates, the government has announced a response policy. Following last year, KEPCO, which recorded the largest loss in history in the first quarter of this year, is highly likely to be designated as a financial risk institution.
The Ministry of Strategy and Finance held the 6th Public Institution Steering Committee on the 3rd and announced that it had reported a plan to strengthen the financial soundness of public institutions to implement the ‘Intensive Management System for Financial Risk Institutions’. The government has managed the financial status of 130 institutions through the management evaluation of public institutions. Some 40 institutions with large assets such as 2 trillion won or more or with capital erosion were required to submit mid- to long-term financial management plans to improve soundness.
However, the government decided to introduce a designation system as a financial risk institution, judging that the existing system would not be able to prevent the increase in public institution debt. Among the institutions subject to the preparation of mid- to long-term financial management plans, it was decided to evaluate the financial status of 27 institutions excluding financial institutions, and select regarding 10 institutions as financial risk institutions next month.
The government plans to select institutions with scores that do not meet the ‘investment qualification’ criteria as financial risk institutions by setting its own indicators by referring to the credit rating techniques of private credit rating agencies. Even if the government’s own indicators determine that it is suitable for investment, it plans to include institutions with a debt ratio above a certain level as financial risk institutions. If it is designated as a financial risk institution, the company plans to make the mid- to long-term financial management plan go through its own committee verification with external experts participating, and intensively manage it by negotiating the total amount of annual investment and the size of the contribution. In addition, by setting a target interest rate, the company plans to increase management efficiency by issuing long-term bonds, diversifying debt portfolios, and adjusting borrowing times.
By Kang Jin-gyu, staff reporter josep@hankyung.com
ⓒ Hankyung.com, unauthorized reprinting and redistribution prohibited
