South Korea

Households are spending more of their post-tax income on food than at any time since the mid-2000s as stagnant wages and high inflation squeezes living standards, official figures show. The poorest 20 percent of families spent 20.7 percent of their disposable income on food last year, the highest since the same level was reached in 2005, according to data from Statistics Korea Monday, The Korea Times reported. The average household spent 14.18 percent of its disposable income on food last year, the highest since 14.61 percent measured six years earlier.

South Korea has begun collecting a levy on domestic banks and local branches of foreign banks it introduced in August, hoping to help the economy guard against shocks stemming from rapid capital flows in and out of the country, the Finance Ministry said Sunday. The Australia & New Zealand Banking Group Ltd. paid $759,000, making it the first foreign or domestic bank to pay what is called the "macroprudential stability levy" to the Bank of Korea.

As Korea's economy entered a depression, the number of monthly personal bankruptcy cases soared to over 10,000 in just three months, The Chosunilbo reported. The Supreme Court said Monday that as many as 10,169 personal bankruptcies were filed last month, an increase from 8,786 in September. The month-on-month increase rate of personal bankruptcies was 117 cases, or 2 percent, in September and 1,383 cases, or 15.7 percent, in October, showing a steep climb since the Lehman Brothers farrago.

Listed small- and medium-sized enterprises (SMEs) might face a series of bankruptcies as their holdings of cash reduced significantly last year, The Korea Times reported. According to the Korea Exchange and the Korea Listed Companies Association, the total cashable assets of 612 listed companies in Korea, which settled accounts on Dec. 31, stood at 52.22 trillion won ($46.71 billion), a 3.4 percent decrease from the previous year. Cashable assets include not just cash, but bank deposits and other financial products that could be turned into cash within three months.

A sharp rise in unsecured loans to households is feared to aggravate the financial status of savings banks that are beset by non-performing loans extended for construction project financing (PF), The Korea Times reported. According to preliminary data from the Financial Supervisory Service (FSS), such loans extended by the secondary financial institutes last year exceeded 10 trillion won ($8.9 billion) for the first time. In September 2009, the amount stood at about 7 trillion won, signifying a 3 trillion won jump in less than two years.

South Korea's Ministry of Strategy and Finance said Tuesday that it will continue studying ways to reduce the economic risk posed by rapid capital flows in and out of the country, as growing concerns about the euro zone stoke fear of another global economic shock, The Wall Street Journal reported. Vice Finance Minister Shin Je-yoon said at a briefing Monday that the bond market and interbank lending market are two key areas for additional policy consideration.

The “Buffett tax” will affect very few this year as just 0.17 percent of taxpayers reported in 2010 that they made enough to be affected by the newly-introduced highest rate, the tax agency said Tuesday, The Korea Times reported. The National Assembly passed a revised bill last week that allows a collected 38-percent tax rate from those who earn 300 million won ($270,000) or more annually. It has been dubbed the Buffett tax after Berkshire Hathaway Chairman Warren Buffett, who suggested the U.S. government raise the tax rate of rich people like him.

A savings bank undergoing a normalization plan was found to have extended loans to applicants using borrowed names, the financial watchdog said Monday, The Korea Times reported. As the grace period for six secondary lenders that survived the government’s mass suspension in September last year and have pushed for normalization ended last month, the financial authorities are expected to shortly come up with a clearing list. There are growing concerns that the fallout of last year’s savings bank scandal that hit domestic financial markets hard is likely to continue in the new year.

How bad is the debt problem in South Korea? There are some new numbers that provide clues, The Wall Street Journal Korea Real Time blog reported. More than 1 million Koreans, or about 4% of the economically-active population of 25 million, once joined in or are currently working with personal debt workout programs, the Credit Counseling & Recovery Service says. The non-profit agency started the program called “Personal Workout” in October 2002 in order to help people resolve their debt problems and regain their credit.

Households are sinking under a sea of debt and threaten to take the country’s fragile economy down with them. Policymakers are rightfully alarmed, but their scrambling appears to be pushing families further into the abyss rather than keeping them afloat, The Korea Times reported in a commentary. Under enormous pressure to navigate the country out of this mess, officials at the Financial Services Commission (FSC) and Bank of Korea (BOK) are trying their hardest to put on brave faces and claim the current levels of indebtedness are broadly manageable.