Credit risks of South Korean small firms are expected to rise in the third quarter due to sluggish demand in the domestic market, central bank survey showed Wednesday.
The credit risk index, which measures risks of borrowers' failure to service debts, for small companies stood at 31 for the third quarter, up 6 points from the prior quarter, according to the Bank of Korea (BOK).
The index was based on a poll of officials in charge of lending at 16 local banks. The higher reading means more risks of default among small firms.
Amid the faltering domestic demand and uncertainties over business conditions, small companies sensitive to the business cycle faced higher risks of default, a BOK official said.
Demand for borrowing money from banks was expected to weaken in the third quarter among small companies.
The lending attitude index, which gauges lending practices of banks over the next three months, for small firms came in at 22 for the third quarter, down 3 points from the prior quarter.
Credit risks among big corporations were also expected to grow amid the local currency's ascent to the U.S. dollar, which will worsen profitability of large exporters.
The credit risk index for big companies came to 19 in the third quarter, up 3 points from three months earlier. It was the highest since 19 tallied in the first quarter of 2009.