The Korean government has promised up to $100 billion in loan guarantees and another $30 billion in new loans for Korean banks.The Financial Services Commission (FSC) said yesterday that the Korean government would provide guarantees for interbank loans and the external debt of national banks, as well as providing extra liquidity for domestic markets.
The FSC said: “As other major economies start providing guarantees to inter-bank loans, the Korean government will take similar measures to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market”.
Once it receives approval from the National Assembly, the government will provide three-year guarantees on up to $100 billion of debt issued by Korean banks between today and June 30, 2009. Over that period, $80 billion of Korean bank debt is set to mature, the FSC said.
Until the Assembly approves the plan, two state-owned banks, Korea Development Bank and Korea Eximbank, will provide the guarantees.
The government and the Bank of Korea have also promised to improve their banks' dollar liquidity by lending out an additional $30 billion from their foreign exchange reserves, and will provide Korean won liquidity by purchasing of government bonds, redeeming monetary stabilisation bonds early, and expanding repo facilities.
The government also promised an extra 1 trillion won investment in the majority state-owned Industrial Bank of Korea, which it said "is likely to translate into additional loans worth 12 trillion won available to small and mid-sized companies".
See also: ING becomes latest member of helping hand scheme
Swiss National Bank to take $60 billion in UBS assets
Eurozone governments unveil details of rescue plans
UK to lead global efforts to restore stability
Topics: Korea, North
More on Structured Products
Roos to head equity sales and prime finance at Citi, and other moves
Many investors favour one approach over the other, belying their similar aims
Growth of renminbi assets ends Taiwan insurers' love affair with structured credit
State watchdogs issue warnings as insurers turn to proprietary index products
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.