ID :
34645
Tue, 12/09/2008 - 15:58
Auther :
Shortlink :
http://m.oananews.org//node/34645
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S. Korea's ruling party calls for lower reserve ratio
SEOUL, Dec. 9 (Yonhap) -- South Korea's top ruling party policymaker called on the central bank Tuesday to slash the reserve ratio on deposits to help local banks ride out the ongoing credit crunch.
The remark by Lim Tae-hee, head of the ruling Grand National Party policy
committee, comes as local banks are struggling to cope with the U.S.-triggered
liquidity crunch despite a string of emergency measures to supply cash to banks
and lower interest rates.
Analysts have criticized the Bank of Korea for not being active enough in
implementing support measures while banks, businesses and households bear the
brunt of the worldwide financial tsunami and its spillover into the real economy.
"There is a need for the Bank of Korea to reconsider its cash reserve ratio so
that it fits the current circumstances," Lim told a press briefing Tuesday.
"Local banks need more liquidity so that they can lend money to companies."
The central bank decided last week to pay 500 billion won ($346 million) worth of
interest on local banks' cash reserves, ignoring growing calls to slash the
reserves ratio from the current 7 percent.
The reserve ratio refers to the percentage of customer deposits that banks are
required to set aside in cash. If the central bank cuts the ratio, local
commercial banks will have more room to make loans.
Lim added that the government and his party are actively considering ways of
bolstering the capital base at state-run banks, including the Korea Development
Bank and Korea Exim Bank.
"This will rid the banks of concerns and encourage them to increase lending to
companies in need," he said. "About 3.8 trillion won has been set aside for
this."
The capital increase would lead to the improvement of the banks' capital adequacy
ratios, which have fallen significantly over the past months. Korean banks'
average capital ratio fell below 11 percent at the end of September, the lowest
in seven years.
South Korean lenders have been increasingly reluctant to extend loans,
particularly to smaller companies. They have encountered difficulty in raising
funds and rolling over debts amid the turbulent financial climate.
hayney@yna.co.kr
(END)
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The remark by Lim Tae-hee, head of the ruling Grand National Party policy
committee, comes as local banks are struggling to cope with the U.S.-triggered
liquidity crunch despite a string of emergency measures to supply cash to banks
and lower interest rates.
Analysts have criticized the Bank of Korea for not being active enough in
implementing support measures while banks, businesses and households bear the
brunt of the worldwide financial tsunami and its spillover into the real economy.
"There is a need for the Bank of Korea to reconsider its cash reserve ratio so
that it fits the current circumstances," Lim told a press briefing Tuesday.
"Local banks need more liquidity so that they can lend money to companies."
The central bank decided last week to pay 500 billion won ($346 million) worth of
interest on local banks' cash reserves, ignoring growing calls to slash the
reserves ratio from the current 7 percent.
The reserve ratio refers to the percentage of customer deposits that banks are
required to set aside in cash. If the central bank cuts the ratio, local
commercial banks will have more room to make loans.
Lim added that the government and his party are actively considering ways of
bolstering the capital base at state-run banks, including the Korea Development
Bank and Korea Exim Bank.
"This will rid the banks of concerns and encourage them to increase lending to
companies in need," he said. "About 3.8 trillion won has been set aside for
this."
The capital increase would lead to the improvement of the banks' capital adequacy
ratios, which have fallen significantly over the past months. Korean banks'
average capital ratio fell below 11 percent at the end of September, the lowest
in seven years.
South Korean lenders have been increasingly reluctant to extend loans,
particularly to smaller companies. They have encountered difficulty in raising
funds and rolling over debts amid the turbulent financial climate.
hayney@yna.co.kr
(END)
Download this as a file
