Korea labels 49 companies unfit

By CNN's Alex Frew McMillan and reports

SEOUL, South Korea -- South Korea's banks have labelled 49 companies non-viable as part of ongoing reforms.

The Financial Supervisory Commission refused to reveal the companies' names, because losing creditor support could hurt their chances of making it on their own.

But the banks and the FSC, after a review, decided the companies are unlikely to survive. They will stop getting loans to free up money for companies with better turnaround prospects.

The review is part of an overhaul of 1,544 companies by 22 banks, due to end in September. The FSC overseas bank reform in South Korea.

Experts say efforts to deal with a huge amount of debt still aren't going far or fast enough, though.

AIG and Daewoo deals still in offing

The fate of 546 companies has now been decided. Analysts assume most of the companies targeted to lose bank support in this review are small.

The real problem companies limp on, they say.

Critics like the International Monetary Fund have encouraged Korea to do more to reform its private sector.

The South Korean government agreed to push reform when it got a $58 million bailout after the Asian financial crisis.

Its chaebols, or conglomerates, have a hefty debt load. The Korean government has been trying to break their stranglehold on business and force them to unwind some of their assets.

South Korea also nationalized many of its banks during the Asian financial crisis and is now looking to sell off those stakes, often to overseas companies.

According to the Korea Economic Daily, a consortium led by American International Group is to wrap up a deal to buy 34 percent of Hyundai Securities by the end of this week.

South Korea's finance minister said at the start of August that he wanted that sale resolved by the end of September.

Negotiations to sell parts of bankrupt Daewoo Motor to General Motors drag on. The finance minister also said he wanted that resolved in the same timeframe.

The main sticking point is whether GM will take on Daewoo's aging plant in Bupyong, a hotbed of labor unrest.

Reuters contributed to this report.