ID :
50633
Mon, 03/16/2009 - 07:49
Auther :
Shortlink :
https://www.oananews.org//node/50633
The shortlink copeid
Bailout funds not needed to help S. Korean banks: think tank
SEOUL, March 15 (Yonhap) -- South Korean banks will not require the injection of bailout funds to cope with the ongoing global financial crisis, a local think tank said Sunday.
The Korea Institute of Finance (KIF) said in a report that the current crisis,
triggered by the collapse of U.S. investment giant Lehman Brothers Holdings Inc.
last year, was largely due to investments made by lenders into derivatives and
non-interest based financial products.
It stressed that because local banks did not generally engage in derivatives,
with most profits being generated by lending to businesses and households, they
have been less affected by the worldwide crisis.
"On average, loans account for 68.8 percent of all asset operations by South
Korean banks, compared to 57.6 percent by commercial U.S. lenders," said Koo
Jung-hoon, a research fellow at KIF.
Koo also said that in terms of off-balance sheet vehicles, derivatives made up an
average 173.7 percent of assets controlled by local banks compared with 1,469.6
percent tallied for banks in the United States.
The researcher said that while local banks suffered an average 50 percent drop in
interest-related profit earnings for the whole of last year, U.S. investment
banks such as Citibank reported losses reaching 90 percent.
"The downturn in the domestic economy that has affected profit levels, pushing
down the average tangible common equity ratio of local banks to 6.23 percent. But
this is still higher than 1.5 percent for Citibank, 1.1 percent for UBS and 2.8
percent for Bank of America," the expert said.
British ratings agency Fitch Ratings, however recently said South Korea's
20-trillion-won (US$13.5 billion) bank recapitalization fund is insufficient.
The fund will be used to buy subordinated and hybrid bonds from banks, with the
aim at stimulating lending and boosting their capital adequacy ratios. This is
different from the bailouts seen in the U.S., in which banks are essentially
nationalized and restructured using public money.
Washington has said it will inject $450 million worth of public funds to
Citibank, while London recently announced a measure that would give 370 million
British pounds in bailouts to three banks that have been rocked by the financial
crisis.
The KIF, meanwhile, said South Korean banks should be able to cope with the
maximum 42 trillion won in additional losses that Fitch Ratings claimed could hit
these firms by the end of 2010.
The tangible common equity ratios and Bank for International Settlements capital
ratios of local banks are actually better than those forecast for many foreign
lenders, according to the institute.
yonngong@yna.co.kr
(END)
The Korea Institute of Finance (KIF) said in a report that the current crisis,
triggered by the collapse of U.S. investment giant Lehman Brothers Holdings Inc.
last year, was largely due to investments made by lenders into derivatives and
non-interest based financial products.
It stressed that because local banks did not generally engage in derivatives,
with most profits being generated by lending to businesses and households, they
have been less affected by the worldwide crisis.
"On average, loans account for 68.8 percent of all asset operations by South
Korean banks, compared to 57.6 percent by commercial U.S. lenders," said Koo
Jung-hoon, a research fellow at KIF.
Koo also said that in terms of off-balance sheet vehicles, derivatives made up an
average 173.7 percent of assets controlled by local banks compared with 1,469.6
percent tallied for banks in the United States.
The researcher said that while local banks suffered an average 50 percent drop in
interest-related profit earnings for the whole of last year, U.S. investment
banks such as Citibank reported losses reaching 90 percent.
"The downturn in the domestic economy that has affected profit levels, pushing
down the average tangible common equity ratio of local banks to 6.23 percent. But
this is still higher than 1.5 percent for Citibank, 1.1 percent for UBS and 2.8
percent for Bank of America," the expert said.
British ratings agency Fitch Ratings, however recently said South Korea's
20-trillion-won (US$13.5 billion) bank recapitalization fund is insufficient.
The fund will be used to buy subordinated and hybrid bonds from banks, with the
aim at stimulating lending and boosting their capital adequacy ratios. This is
different from the bailouts seen in the U.S., in which banks are essentially
nationalized and restructured using public money.
Washington has said it will inject $450 million worth of public funds to
Citibank, while London recently announced a measure that would give 370 million
British pounds in bailouts to three banks that have been rocked by the financial
crisis.
The KIF, meanwhile, said South Korean banks should be able to cope with the
maximum 42 trillion won in additional losses that Fitch Ratings claimed could hit
these firms by the end of 2010.
The tangible common equity ratios and Bank for International Settlements capital
ratios of local banks are actually better than those forecast for many foreign
lenders, according to the institute.
yonngong@yna.co.kr
(END)
