South Korea announces bank rescue package
Previously, analysts had raised doubts over the country's ability to service its foreign debt
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Sunday, 19, Oct 2008 10:40
South Korea has announced a rescue package for its financial services firms as analysts raised doubts about whether the country's banks have sufficient cash reserves to serve its foreign debt.
In an announcement, the country's government that it would guarantee external debt held by South Korean banks as well as extend support to banks to ease their liquidity concerns.
The measures will involve a $100 billion (£58 billion) guarantee of all foreign loans held by the country's financial institution for a period of three years as well as $30 billion (£17 billion) in an injection of liquidity to banks.
In addition, a total of one trillion won (£433 billion) will be pumped into the Industrial Bank of Korea in order to provide liquidity to small businesses.
A notification from the country's strategy and finance ministry stated: "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 markets.
"When Korean banks or their overseas branches take on external debt from October 20th this year to June 30th, 2009, the government will offer guarantees to the debt for three years," the statement said.
In separate news, two Japanese newspapers have quoted defence sources in South Korea's neighbour, North Korea, as saying an "important announcement" was due to be made tomorrow.
Media reports have speculated that the announcement, which could usher in political and economic changes in the region, could be linked to the health of the state's authoritarian leader, Kim Jong-Il.