S.Korea watchdog says more real estate loans may turn sour

SEOUL Thu May 19, 2011 4:59pm EDT

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SEOUL May 20 (Reuters) - South Korea's financial supervisor said additional real estate project financing loans might go sour due to the prolonged slump in the property market.

The Financial Supervisory Service (FSS) said in a statement that 18 domestic banks held 6.7 trillion Korean won ($6.16 billion) in distressed real-estate project financing loans at end-March, up from 6.4 trillion won at the end of December.

The amount of bad property loans grew as some builders had filed for bankruptcy protection, according to FSS.

The regulator added that it would advise lenders to transfer bad real estate project-financing loans to a new debt-clearing bank that would be charged with buying up real estate project financing loans worth up to 1 trillion won. .

Large commercial lenders promised to cooperate with the government to prevent any financial risks stemming from insolvent real estate project-financing loans. ($1 = 1088.500 Korean won) (Reporting by Ju-min Park; Editing by Ken Wills)

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