...The rapid spread of COVID- 19 in the recent months has introduced significant unce rtainty to the performance of South Korea's banks, at least i n the short te rm. The impact on their credit profiles in the medium te rm depends not only on the severity and duration of what is now a global health emergency, but also on government responses. Economic activities across various sectors in South Korea have slowed conside rably and abruptly due to the coronavirus outbreak. The potential for a sharp rise in delinquencies increases with the duration of the e pidemic, especially among SMEs operating in the service sectors whe re close proximity or in-pe rson contact is the norm, such as tourism, education, entertainme nt, transportation and off-line shopping. We estimate that on average about 14% of Korean comme rcial banks' total loans are exposed to these sectors that are the first to be affected by the abrupt sl owdown in consumer demand. Coming into 2020, the ove rall loan quality of the comme...
