Shinhan Bank plans to contribute capital to bad bank

SEOUL, April 1 (Yonhap) -- Shinhan Bank, South Korea's No. 2 lender, said
Wednesday it plans to contribute capital to an envisioned private bad bank which
will be charged with buying distressed loans.
Local lenders plan to set up the bad bank early this month to clear bad debts
from their balance sheets. Market watchers estimate the private debt clearer will
require around 3 trillion won (US$2.15 billion) in capital.
"Shinhan plans to contribute money into the bad bank when it taps into a bank
recapitalization fund," Lee Baek-soon, president of Shinhan Bank, said at a news
conference.
Lee, however, failed to say how much the lender will shell out for the bad bank.
Shinhan has yet to use the bank recapitalization fund.
The launch of the bad bank comes as problem loans are piling up at local lenders
due to the slowing economy and a corporate revamp drive.
To keep soaring bad loans from hurting lenders' health, South Korea has launched
a 20 trillion won bank recapitalization fund that will be used to buy
subordinated bonds and hybrid debt from them.
On Tuesday, eight financial firms received a combined 3.96 trillion won in
capital by tapping the fund.
Analysts say the expected bad bank could compete with the state-run Korea Asset
Management Corp. (KAMCO), which currently enjoys a monopoly on purchasing
distressed bank loans. Local banks complain KAMCO buys their problem loans at too
low prices.
KAMCO plans to buy part of the trillions of won in property loans extended by
local banks and other financial firms in a bid to stem their deteriorating
financial health.
sooyeon@yna.co.kr
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