ID :
35579
Sun, 12/14/2008 - 14:01
Auther :
Shortlink :
https://www.oananews.org//node/35579
The shortlink copeid
Seoul weighs more bank support measures
SEOUL, Dec. 14 (Yonhap) -- South Korea's central bank and government are reviewing a variety of measures to help improve conditions at local banks and free up lending amid a global credit squeeze, government sources said Sunday.
Industry leader Kookmin Bank and its local rivals have come under pressure to
increase their lending capacity and help corporations facing default. But banks
have so far remained reluctant to extend loans to companies and households, as
lenders too have struggled to cope with mounting bad assets.
The average capital adequacy ratio at 18 local banks -- a key measure of
financial strength -- dropped to 10.79 percent at the end of September from 11.36
percent three months earlier, due to increased bad loans.
Their ratios may slide further as the South Korean economy, Asia's
fourth-largest, is set to face a steep decline in growth.
The economy grew just 0.5 percent in the third quarter from the three months
prior. Experts say growth will continue to dwindle in the fourth quarter due to
falling exports and weak domestic demand.
"In order to help banks extend more loans, their capital adequacy ratios should
be raised," said an official on condition of anonymity. "They are now selling
bonds to shore up their capital base, but the government is preparing various
measures for them."
According to the sources, state-run lenders and pension funds may form a pool to
buy shares to be issued by banks. State-run banks such as Korea Development Bank
also may provide additional support to commercial lenders that fail to keep their
ratios above a certain level.
In a related move, the government increased its investment in state-run lenders
to 5.36 trillion won (US$3.89 billion) from an earlier earmarked amount of 3.61
trillion won.
There are growing concerns that financial market instability will lead to
worsening corporate liquidity and a slump in the real economy.
South Korea has pumped funds into the banking system and guaranteed lenders'
debts to stem the impact of the worldwide financial crisis on its export-reliant
economy. The government has also set aside a 10 trillion won fund -- pooled by
banks, brokerages and insurers -- to help companies struggling to sell bonds.
Industry leader Kookmin Bank and its local rivals have come under pressure to
increase their lending capacity and help corporations facing default. But banks
have so far remained reluctant to extend loans to companies and households, as
lenders too have struggled to cope with mounting bad assets.
The average capital adequacy ratio at 18 local banks -- a key measure of
financial strength -- dropped to 10.79 percent at the end of September from 11.36
percent three months earlier, due to increased bad loans.
Their ratios may slide further as the South Korean economy, Asia's
fourth-largest, is set to face a steep decline in growth.
The economy grew just 0.5 percent in the third quarter from the three months
prior. Experts say growth will continue to dwindle in the fourth quarter due to
falling exports and weak domestic demand.
"In order to help banks extend more loans, their capital adequacy ratios should
be raised," said an official on condition of anonymity. "They are now selling
bonds to shore up their capital base, but the government is preparing various
measures for them."
According to the sources, state-run lenders and pension funds may form a pool to
buy shares to be issued by banks. State-run banks such as Korea Development Bank
also may provide additional support to commercial lenders that fail to keep their
ratios above a certain level.
In a related move, the government increased its investment in state-run lenders
to 5.36 trillion won (US$3.89 billion) from an earlier earmarked amount of 3.61
trillion won.
There are growing concerns that financial market instability will lead to
worsening corporate liquidity and a slump in the real economy.
South Korea has pumped funds into the banking system and guaranteed lenders'
debts to stem the impact of the worldwide financial crisis on its export-reliant
economy. The government has also set aside a 10 trillion won fund -- pooled by
banks, brokerages and insurers -- to help companies struggling to sell bonds.
