ID :
26207
Thu, 10/23/2008 - 18:08
Auther :
Shortlink :
http://m.oananews.org//node/26207
The shortlink copeid
(LEAD) BOK raises cap on loans to commercial banks
SEOUL, Oct. 23 (Yonhap) -- South Korea's central bank said Thursday it has decided to raise the cap on its low-rate loans to commercial lenders in a bid to help smaller companies weather the current cash crunch.
The Bank of Korea (BOK) said it upped the limit by 2.5 trillion won (US$1.75
billion) to 9 trillion won. The loans, which commercial banks then relend solely
to small and medium enterprises, carry an annual interest of 3.25 percent.
It is the first time the BOK has increased the upper limit since Oct. 2001. The
move takes effect staring Nov. 3, the BOK added.
"The need to induce banks into expending more loans to smaller firms has
increased," Jang Byung-wha, director general at the BOK's monetary policy
department, said at a press conference.
"Financial conditions facing smaller firms are worsening as domestic demand is
sluggish and local banks are strengthening their risk management. Given a
possible continuation of the financial turmoil and an outlook of the slowing
economy, this situation will likely go on for a considerable period of time," he
said.
South Korea's smaller companies are suffering from a cash shortage as banks have
become increasingly reluctant to extend loans amid the global financial
turbulence.
The government unveiled on Sunday sweeping measures aimed at providing three-year
state guarantees for banks' foreign debts worth up to US$100 billion and
injecting $30 billion into dollar-starved banks and companies. On Oct. 1, the
financial watchdog said the government will extend liquidity of about 4.3
trillion won to smaller firms.
"Smaller companies suffering from losses related to currency option contracts
were also included as beneficiaries of such loans," Jang said.
Many small companies took currency options known as "knock-in knock-out (KIKO)"
to hedge currency risks with the expectation that the won's value would not drop
sharply. But as the won has declined more than 30 percent against the U.S. dollar
so far this year, their losses have snowballed.
Meanwhile, Jang added the BOK is considering buying bonds sold by commercial
banks as part of its contingency plans, but a possible decision would be made
only by the central bank's policymakers.
South Korea's financial watchdog urged the BOK to purchase bonds issued by local
banks in a bid to help them secure Korean currency liquidity. But the central
bank remains cautious about purchasing such bonds, as they are quite risky
compared to government debts.
According to sources, South Korean lenders have about 25.5 trillion won worth of
bank notes that will reach maturity in the fourth quarter.
Local banks are suffering from cash shortages as they are having trouble raising
funds by selling certificates of deposit or debts, or rolling over debts amid the
global financial turmoil.
sooyeon@yna.co.kr
(END)
The Bank of Korea (BOK) said it upped the limit by 2.5 trillion won (US$1.75
billion) to 9 trillion won. The loans, which commercial banks then relend solely
to small and medium enterprises, carry an annual interest of 3.25 percent.
It is the first time the BOK has increased the upper limit since Oct. 2001. The
move takes effect staring Nov. 3, the BOK added.
"The need to induce banks into expending more loans to smaller firms has
increased," Jang Byung-wha, director general at the BOK's monetary policy
department, said at a press conference.
"Financial conditions facing smaller firms are worsening as domestic demand is
sluggish and local banks are strengthening their risk management. Given a
possible continuation of the financial turmoil and an outlook of the slowing
economy, this situation will likely go on for a considerable period of time," he
said.
South Korea's smaller companies are suffering from a cash shortage as banks have
become increasingly reluctant to extend loans amid the global financial
turbulence.
The government unveiled on Sunday sweeping measures aimed at providing three-year
state guarantees for banks' foreign debts worth up to US$100 billion and
injecting $30 billion into dollar-starved banks and companies. On Oct. 1, the
financial watchdog said the government will extend liquidity of about 4.3
trillion won to smaller firms.
"Smaller companies suffering from losses related to currency option contracts
were also included as beneficiaries of such loans," Jang said.
Many small companies took currency options known as "knock-in knock-out (KIKO)"
to hedge currency risks with the expectation that the won's value would not drop
sharply. But as the won has declined more than 30 percent against the U.S. dollar
so far this year, their losses have snowballed.
Meanwhile, Jang added the BOK is considering buying bonds sold by commercial
banks as part of its contingency plans, but a possible decision would be made
only by the central bank's policymakers.
South Korea's financial watchdog urged the BOK to purchase bonds issued by local
banks in a bid to help them secure Korean currency liquidity. But the central
bank remains cautious about purchasing such bonds, as they are quite risky
compared to government debts.
According to sources, South Korean lenders have about 25.5 trillion won worth of
bank notes that will reach maturity in the fourth quarter.
Local banks are suffering from cash shortages as they are having trouble raising
funds by selling certificates of deposit or debts, or rolling over debts amid the
global financial turmoil.
sooyeon@yna.co.kr
(END)
