Bank recapitalization fund will bolster real economy: regulator

SEOUL, March 15 (Yonhap) -- South Korea's financial regulator on Sunday said it is signing agreements with local lenders that will limit their use of a 20-trillion-won (US$13.5 billion) bank recapitalization fund to bolster the sagging economy.

"The contracts with 14 local lenders are aimed at restricting the fund's use to
supporting the real economy and collecting monthly reports on banks' utilization
of the funds," said an official from the Financial Services Commission (FSC).
The capital that lenders draw from the fund may be used to lend to small- and
mid-sized firms and to rollover their debts, according to the FSC, or to provide
bail-out money to companies under debt-rescheduling programs and clear bad debt.
An initial sum of about 12 trillion won is expected to reach lenders later this
month. The fund was established in January to buy subordinated and hybrid bonds
from cash-strapped banks in a bid to boost their capital adequacy ratios and
stimulate lending.
A total of 14 banks have applied to tap the state-run fund, with top lender
Kookmin Bank, Woori Bank and Shinhan Bank asking for the largest amounts at 2
trillion won each.
The FSC has said it is also willing to purchase preferred stocks from lenders in
the next round of capital injection. Local banks have been struggling to raise
their sagging capital adequacy ratios as the economic slowdown has caused more
loans to go sour.
The average capital adequacy ratio of 18 commercial and state banks stood at
12.19 percent as of the end of December, up 1.33 percentage points from three
months earlier.
pbr@yna.co.kr
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