ID :
47496
Wed, 02/25/2009 - 12:16
Auther :
Shortlink :
https://oananews.org//node/47496
The shortlink copeid
S. Korea to pump 12 tln won into banks in March
SEOUL, Feb. 25 (Yonhap) -- South Korea's financial watchdog said Wednesday the
government will initially inject 12 trillion won (US$7.98 billion) into local
banks in March to bolster their capital bases and encourage risk-averse lenders
to expand loans.
The move comes as banks are increasingly reluctant to lend money to cash-strapped
companies on fears that a deepening economic slump may result in more bad loans,
compromising their financial soundness.
The Financial Services Commission (FSC) said the money will come from a bank
recapitalization fund to be used to buy subordinated bonds and hybrid debt from
lenders. The fund will ultimately be expanded to 20 trillion won.
The amount of capital injection will be determined by the size of a bank's assets
and will be adjusted according to changes in its so-called capital adequacy ratio
and track record of lending to smaller firms, the watchdog said.
"Banks will be required to give support to the real economy and accelerate the
corporate restructuring drive in return for tapping the fund. But there will be
no management interference (by the government)," the FSC said in a statement.
Since late last year, local banks have been struggling to raise their falling
capital adequacy ratio, a key barometer of financial health, as the slowing
economy and the corporate restructuring drive are increasing the amount of bad
loans.
The government has said that local banks can tap the recapitalization fund on a
voluntary basis, but banks are wary of using the fund due to fears it may tarnish
their credibility.
But in a meeting with Chin Dong-soo, chairman of the FSC, nine heads of local
banks agreed in principle to use the fund, through which they would increase
lending to cash-strapped smaller firms and brace for the slowing economy and a
corporate revamp.
According to the FSC, the Bank of Korea (BOK), the country's central bank, will
inject 10 trillion won into the proposed fund. State-run Korea Development Bank
will chip in 2 trillion won and other institutional and retail investors plan to
chip in the remainder.
sooyeon@yna.co.kr
(END)
government will initially inject 12 trillion won (US$7.98 billion) into local
banks in March to bolster their capital bases and encourage risk-averse lenders
to expand loans.
The move comes as banks are increasingly reluctant to lend money to cash-strapped
companies on fears that a deepening economic slump may result in more bad loans,
compromising their financial soundness.
The Financial Services Commission (FSC) said the money will come from a bank
recapitalization fund to be used to buy subordinated bonds and hybrid debt from
lenders. The fund will ultimately be expanded to 20 trillion won.
The amount of capital injection will be determined by the size of a bank's assets
and will be adjusted according to changes in its so-called capital adequacy ratio
and track record of lending to smaller firms, the watchdog said.
"Banks will be required to give support to the real economy and accelerate the
corporate restructuring drive in return for tapping the fund. But there will be
no management interference (by the government)," the FSC said in a statement.
Since late last year, local banks have been struggling to raise their falling
capital adequacy ratio, a key barometer of financial health, as the slowing
economy and the corporate restructuring drive are increasing the amount of bad
loans.
The government has said that local banks can tap the recapitalization fund on a
voluntary basis, but banks are wary of using the fund due to fears it may tarnish
their credibility.
But in a meeting with Chin Dong-soo, chairman of the FSC, nine heads of local
banks agreed in principle to use the fund, through which they would increase
lending to cash-strapped smaller firms and brace for the slowing economy and a
corporate revamp.
According to the FSC, the Bank of Korea (BOK), the country's central bank, will
inject 10 trillion won into the proposed fund. State-run Korea Development Bank
will chip in 2 trillion won and other institutional and retail investors plan to
chip in the remainder.
sooyeon@yna.co.kr
(END)
