Top regulator says bank revamp untimely

SEOUL, Nov. 26 (Yonhap) -- South Korea's top financial regulator said Wednesday
that now is not the time for the government to pour public funds into local
banks, as the difficulties they face do not warrant an overhaul.

"Takeovers could come up in the market if some local banks fail to beef up
competitiveness or secure enough capital through self-help measures," Jun
Kwang-woo, chairman of the Financial Services Commission (FSC), told a radio
program.
"If market forces do not work well, the government could play the role of a
catalyst, but it is not the time for the government to push for a banking
overhaul."
His remarks were seen as a turnaround from what he said last week in New York.
Jun told reporters then that the government should play an active role in
tackling the current financial turmoil, hinting at a possible restructuring of
the local banking sector.
South Korean lenders have been increasingly reluctant to extend loans,
particularly to smaller firms, amid a slowing economy and a credit crunch.
In the aftermath of the 1997-98 Asian financial crisis, the local banking sector
underwent a painful restructuring process led by the government, which injected
over 86.9 trillion won (US$57.9 billion) of public funds into the industry.
A series of consolidations in the banking sector reduced the number of commercial
lenders to 18 from 33 prior to the crisis.
Jun added that the government must implement a more expansionary fiscal policy to
bolster the slowing economy and called for the central bank to ease its monetary
stance.
Since October, the Bank of Korea, the country's central bank, has cut its key
interest rate by a combined 1.25 percentage points to 4 percent.
sooyeon@yna.co.kr
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