S. Korean bank plan to take effect over time: official

SEOUL, Oct. 21 (Yonhap) -- South Korea's proposed US$130 billion rescue package for local banks will be effective over time, helping shield the economy from a sharp downturn, a high-ranking official said Tuesday.

The South Korean government pledged Sunday to guarantee $100 billion worth of
foreign currency debts owed by local lenders and offer $30 billion to them as
part of efforts to help ease a liquidity shortage.
The government will also provide tax benefits for long-term equity and bond
investors, and the central bank will buy repurchase agreements and government
bonds from banks to boost won liquidity.
"We expect the measures will help ease liquidity difficulties facing financial
institutions. The measures will take effect over time... Local financial markets
are already showing signs of stability," Vice Finance Minister Kim Dong-soo said
on a local radio program. "The financial aid package is also expected to prevent
financial instability from spilling over into the real economy," he said.
The local currency was quoting at 1,320.40 won to the U.S. dollar as of 10:00
a.m., up 5.40 won from the previous day, and the country's key stock index,
KOPSI, gained 1.23 percent to 1,222.50.
Kim said the government will closely monitor any moral hazard among banks seeking
to take advantage of the government debt guarantee.