Headlines

The historically high level of Korean household debt seems to be a ticking time bomb for the economy, but this isn’t keeping policymakers from encouraging people to borrow more to secure the concrete in the crumbling housing market, The Korea Times reported. The government is planning to announce a package of measures next month aimed at helping potential homebuyers and tenants. The crux may include loosening the country’s debt-to-income (DTI) and loan-to-value (LTV) ratios, which restrict the borrowing proportion of homebuyers in relation to their earning abilities.

The receivers of Pike River Coal say unsecured creditors owed more than $31 million - including $15 million to tradesmen and almost $3 million to employees - are "unlikely" to be paid, the Otago Daily Times reported. The company was placed in voluntary receivership by its board in December, just weeks after 29 men died in an explosion at its underground mine near Greymouth on November 19. PricewaterhouseCoopers' first report on the receivership outlines a total debt owed to creditors of $110.4 million.

Defaults among Irish mortgage holders more than doubled over the course of last year and were still growing in December, according to the latest analysis from Moody’s, the Irish Times reported. The ratings agency found that 1.65 per cent of the residential mortgages it studied had not been repaid for 360 days or more in December, up from 1.62 per cent in November. This compared to 0.7 per cent a year earlier, marking growth of almost 140 per cent over the course of 2010.

Despite complaints from Spain's ailing savings banks that reform efforts are moving too swiftly, the Spanish government is standing firm in its push to quickly convert the local institutions into traditional banks, according to people familiar with the matter, The Wall Street Journal reported. The government's new solvency decree will firm up a set of ambitious overhauls announced by Spanish Finance Minister Elena Salgado last month.

In a blow to the Australian banking industry, ratings firm Moody's Investors Service unexpectedly placed the country's four largest banks on review for a possible downgrade, citing their dependence on global lending markets, The Wall Street Journal reported. A downgrade from their current investment grade rating of Aa1—one notch below Moody's top rating—could increase their costs even as they worry that Australia's rising interest rates will crimp profitability.

Danske Bank and four other Danish lenders have had their credit ratings cut by Moody’s after a bank collapse revealed the country’s government was willing to impose losses on depositors and senior creditors in failed banks, the Irish Times reported. The rating agency said last week’s bankruptcy of Amagerbanken, a small Danish lender, showed that Copenhagen “is now far less willing to continue to support bank creditors at the expense of taxpayers” than just a few months ago.

The International Monetary Fund has recommended that Afghanistan's largest and most troubled bank be placed in receivership and then sold off to recover from reckless lending that brought it to the brink of collapse last year, The Washington Post reported. After a visit to Kabul this month, the IMF recommended that the Afghan government implement several "immediate measures" to deal with Kabul Bank, including prosecuting fraud and placing it under receivership.

The woes of WestLB, which has received $11 billion in taxpayer support since 2009, are symptomatic of a larger problem in the German economy. Many of its biggest banks are still on government life support after making bad lending bets during the bubble years. And with their access to cheap capital long gone, their prospects of becoming profitable again are dubious, the International Herald Tribune reported.

European Union regulators will review competing restructuring plans for WestLB AG, the state- owned lender bailed out during the financial crisis, from the bank’s board and the German government, Bloomberg reported. German Finance Minister Wolfgang Schaeuble proposed the bank transfer its non-saleable assets to a so-called bad bank and sell the rest of its portfolio, EU Competition Commissioner Joaquin Almunia said in an e-mailed statement today. Savings banks would take over the rest of the bank, he said.

Grounded airline Mexicana de Aviacion is in discussions with the International Air Transport Association, or IATA, to possibly rejoin key ticketing and settlement systems as the company seeks to emerge from bankruptcy proceedings, Dow Jones Daily Bankruptcy Review reported. "They have reached out to IATA and we are currently in talks," a spokesman for the association said Tuesday.