S. Korea may inject public funds into ailing savings banks: regulator

SEOUL, April 9 (Yonhap) -- South Korea's top financial regulator said Thursday
the government may inject bailout funds into some local savings banks to help
them cope with soaring bad debts.
"It may be possible that bailout funds would be injected into some local mutual
savings banks," Jin Dong-soo, chairman of the Financial Services Commission, said
in a parliamentary interpellation session.
Last month, the financial watchdog said that local savings banks' exposure to the
construction sector totaled 12.2 trillion won (US$9.14 billion), of which 14
percent is seen as likely to deteriorate, eroding the lenders' assets.
The country's state-run debt restructuring agency said last month it has forged a
deal to buy 1.24 trillion won worth of bad assets from a group of savings banks,
using money raised through debt sales.
With the move, the Korea Asset Management Corp.'s (KAMCO) purchases of
property-related loans from the country's mutual savings banks reached 1.74
trillion won, it said. Jin's comments Thursday suggest taxpayer money could be
also be used to bail out the lenders, on top of previous agreements.
In December, KAMCO bought 502 billion won worth of project financing-related bad
debts from savings banks, which have been hard-hit by the economic crisis as they
face difficulty financing property development projects.
Jin said local banks' fundamentals remain relatively "healthy" compared with
those of their peers in other nations.
South Korea is planning to launch a separate 40 trillion won restructuring fund
this year to buy bad assets from commercial banks.
sam@yna.co.kr
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