Financial turmoil to last until first half of 2009: regulator

SEOUL, Oct. 16 (Yonhap) -- South Korea's top financial regulator said Thursday the current global financial turmoil is likely to persist until the first half of next year, but added the government will push to implement capital market deregulation as planned.

"The global financial crisis is expected to continue for a considerable time.
South Korea's financial markets are also likely to face troubles until the first
half of next year," Jun Kwang-woo, chairman of the Financial Services Commission
(FSC), said during a parliamentary audit.
His remarks came as South Korea's stock and currency markets took a nosedive on
Thursday due to fears about a global economic recession. The benchmark Korea
Composite Stock Price Index (KOSPI) plummeted 8.49 percent to 1,226.55 as of 1:51
p.m., tracking overnight plunges in U.S. markets. The local currency was trading
at 1,326.85 won to the dollar, down 87.35 won from the previous session.
South Korea's brokerage sector is set to undergo a sea change as a new law on
capital market deregulation will go into effect in February 2009. The law is
designed to break down barriers separating the securities, futures and asset
management sectors and allow brokerage houses to play a bigger role in the
financial sector.
Some argue that South Korea should delay implementing the law, which is aimed at
nurturing investment banks like Goldman Sachs Group, after watching U.S.
investment bank Lehman Brothers Holdings Inc. collapse under a pile of bad
assets.
"The goal of the law is to boost the non-banking industry and the lackluster
investment banking business. It's hard to agree with the argument for the delay,"
Jun said.
He added that the FSC plans to consider cutting taxes on securities trading as a
way to stabilize the slumping stock market.
Meanwhile, the FSC said in a report for the audit that it may advise local
savings banks to put aside more money to cover possible loan losses if necessary
amid growing concerns that their lending for real estate projects might go sour.
As of the end of June, real estate project financing loans by savings banks
amounted to an outstanding 12.2 trillion won (US$9 billion). The default rate for
such loans came in at 14.3 percent as of end-June, up from 11.4 percent at the
end of last year, according to the regulator.
"The regulator plans to advise local savings banks to beef up capacity to absorb
possible losses by making them put aside more loan loss reserves when needed,"
the watchdog said.
The report comes as smaller builders, which borrowed mostly from savings banks
during the housing market boom, are suffering from financial burdens caused by
the slowing economy, with some going out of business.
The government has repeatedly said that local savings banks' lending for real
estate project financing has been affected by the slumping housing market, but
adding that there is not a high chance that such loans would go sour.
The number of new apartments that remain unsold stood at 147,000 at the end of
June this year amid concerns that the government's toughened property regulations
might weigh on housing prices.
Anticipating lower home prices, consumers delayed their purchases while builders
hastened to put new homes on the market to avoid the regulations.