ID :
34540
Mon, 12/08/2008 - 18:47
Auther :
Shortlink :
http://m.oananews.org//node/34540
The shortlink copeid
S. Korean banks vow to cut short-term borrowing
SEOUL, Dec. 8 (Yonhap) -- South Korean banks vowed Monday to reduce their
reliance on short-term borrowing, including the sale of bank bonds, in a bid to
help bring down still-high lending rates which hurt households and smaller firms.
Despite the central bank's recent rate cuts, market interest rates, such as
certificates of deposit (CDs), have not fallen as much as expected, putting a
greater burden on households and smaller firms for debt repayment. Yields for CDs
serve as benchmarks for market rates.
"We will make efforts to refrain from selling CDs or bank bonds to help lending
rates fall," the heads of local banks said in a meeting hosted by the Korea
Federation of Banks, an association to promote the interests of the banking
industry.
South Korean banks have sold a huge volume of bonds in the past few years to
secure cash for loans to households and companies.
The bank chiefs also said local banks, including state-run Korea Development Bank
(KDB), plan to inject 8 trillion won (US$5.52 billion) into an envisioned bond
fund aimed at stabilizing the local debt market.
The Financial Services Commission (FSC), the country's financial watchdog, plans
to create a 10 trillion won fund into which banks and other institutional
investors would pool money to buy financial and corporate debts. KDB plans to
invest 2 trillion won in the fund.
On Nov. 24, the Bank of Korea, the country's central bank, said it will provide
up to 5 trillion won to the fund or match up to 50 percent of contributions by
financial firms in a bid to help thaw the frozen debt market.
Meanwhile, local banks decided to allow 27 builders out of 30 applicants to join
a debt rescheduling program under which creditor banks will roll over their debt
by one year.
With the slowing economy resulting in a huge number of unsold apartments, many
cash-strapped small and mid-sized construction companies are struggling to
service debts taken out during the 2005-2006 housing boom.
sooyeon@yna.co.kr
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