$130 billion aid 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

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here