Financial Supervisory Service Identifies Companies at Risk

The Financial Supervisory Service (FSS) has revealed that 230 companies are showing signs of insolvency this year, according to their regular credit risk assessment conducted by creditor banks. This figure, just one less than the record high since 2014, underscores the financial challenges many companies are facing amid a sluggish economic recovery and persistently high interest rates.

The FSS's assessment highlights a concerning trend: while the total number of companies at risk of insolvency has slightly decreased, the number of companies with the lowest grade, indicating low prospects for normalization, has significantly increased. Specifically, the number of D grade companies surged by 17 to 130, while the number of C grade companies decreased by 18 to 100 compared to the previous year.

Companies showing signs of insolvency are those that creditor banks deem unable to repay borrowed funds without external financial support or additional borrowing. These companies are classified into grades A to D, with grades C and D being considered as showing signs of insolvency. D grade companies, in particular, have low prospects for normalization and are often subject to court management.

The increase in D grade companies was observed across both large and small businesses. The number of large companies showing signs of insolvency increased by 2 to 11 compared to the previous year. For small companies, the total number of companies showing signs of insolvency decreased by 2 to 219 compared to the previous year, but the number of D grade companies increased by 12 from 111 to 123.

By industry, the real estate sector had the highest number of companies showing signs of insolvency this year with 30 companies. This was followed by the automobile industry (21 companies), rubber and plastics, machinery and equipment (18 companies each), and wholesale and brokerage (14 companies).

The FSS explained that the increase in D grade companies is due to the deterioration of business conditions caused by delayed economic recovery, rising costs, and prolonged high interest rates, which have exacerbated the management difficulties of some marginal companies.

In response to the situation, the FSS plans to induce prompt workouts and insolvency resolutions for companies showing signs of insolvency. Additionally, financial support will be strengthened for companies experiencing temporary financial difficulties, even if they are not showing signs of insolvency.