ID :
36269
Thu, 12/18/2008 - 14:20
Auther :
Shortlink :
https://www.oananews.org//node/36269
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BOK mulling contribution to capital base support fund
SEOUL, Dec. 18 (Yonhap) -- South Korea's central bank said Thursday it is considering contributing 10 trillion won (US$7.69 billion) to a proposed fund aimed at helping local lenders raise the capital base in a bid to ease a credit crunch.
The Financial Services Commission (FSC), the country's financial watchdog, is
seeking to set up a 20-trillion-won fund in January to be used to buy
subordinated bonds and hybrid debt sold by lenders.
"The Bank of Korea (BOK) is studying how to contribute to the envisioned fund
through consultation with the FSC," the BOK said in a statement. "The central
bank's Monetary Policy Committee will make a financial decision after considering
the details."
The move comes as South Korean lenders are struggling to bolster their falling
capital adequacy ratio, a key barometer of financial soundness since the slowing
economy and a credit squeeze are increasing bad loans.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.79 percent as of the end of September, the lowest in more than seven years and
down from 11.36 percent three months earlier. The ratio measures the percentage
of a bank's capital to its risk-weighted credit.
"A plan to set up a fund comes as the need to beef up local banks' capacity to
absorb possible losses is mounting to brace for a sharp economic slowdown and
potential revamp in the banking sector," a senior official at the BOK said.
If the BOK's board members approves the fund contribution, the central bank would
extend 10 trillion won in loans to the fund through a special purpose company,
which would mark the first move for the BOK to offer such kind of lending since
the 1997-98 Asian financial crisis.
On Dec. 11, BOK Gov. Lee Seong-tae said after a rate-setting meeting that South
Korea is standing on the brink of a financial emergency, which complicates the
BOK's decision over whether to use other contingency policy tools.
"The current credit squeeze is worrisome. The BOK's rate cuts and liquidity
supply would help ease the crunch in some ways, but it is too early to say that
the squeeze has begun to fully thaw," the official said.
Last week, the BOK cut the key interest rate by a record one percentage point to
an all-time low of 3 percent to bolster the slowing economy. Since early October,
the BOK has trimmed the rate by a combined 2.25 percentage points.
sooyeon@yna.co.kr
(END)
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The Financial Services Commission (FSC), the country's financial watchdog, is
seeking to set up a 20-trillion-won fund in January to be used to buy
subordinated bonds and hybrid debt sold by lenders.
"The Bank of Korea (BOK) is studying how to contribute to the envisioned fund
through consultation with the FSC," the BOK said in a statement. "The central
bank's Monetary Policy Committee will make a financial decision after considering
the details."
The move comes as South Korean lenders are struggling to bolster their falling
capital adequacy ratio, a key barometer of financial soundness since the slowing
economy and a credit squeeze are increasing bad loans.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.79 percent as of the end of September, the lowest in more than seven years and
down from 11.36 percent three months earlier. The ratio measures the percentage
of a bank's capital to its risk-weighted credit.
"A plan to set up a fund comes as the need to beef up local banks' capacity to
absorb possible losses is mounting to brace for a sharp economic slowdown and
potential revamp in the banking sector," a senior official at the BOK said.
If the BOK's board members approves the fund contribution, the central bank would
extend 10 trillion won in loans to the fund through a special purpose company,
which would mark the first move for the BOK to offer such kind of lending since
the 1997-98 Asian financial crisis.
On Dec. 11, BOK Gov. Lee Seong-tae said after a rate-setting meeting that South
Korea is standing on the brink of a financial emergency, which complicates the
BOK's decision over whether to use other contingency policy tools.
"The current credit squeeze is worrisome. The BOK's rate cuts and liquidity
supply would help ease the crunch in some ways, but it is too early to say that
the squeeze has begun to fully thaw," the official said.
Last week, the BOK cut the key interest rate by a record one percentage point to
an all-time low of 3 percent to bolster the slowing economy. Since early October,
the BOK has trimmed the rate by a combined 2.25 percentage points.
sooyeon@yna.co.kr
(END)
Download this as a file
