KDB vows to support banks, smaller firms

SEOUL, Dec. 10 (Yonhap) -- South Korea's state-run Korea Development Bank (KDB) will make efforts to help financial firms increase capital and extend support to cash-strapped smaller firms, its chief said Wednesday.
South Korean banks are struggling to bolster their falling capital adequacy
ratios, a key barometer of financial soundness, as the slowing economy increases
the amount of bad loans.
"KDB plans to support banks' efforts to increase their capital base by buying
their subordinated bonds and will play a role as a safety valve to help market
players stave off the global financial turmoil," KDB chairman Min Euoo-sung said
during a forum.
When a lender sells subordinated debt, proceeds from the debt sale are recorded
as supplementary capital, which helps raise the lender's capital adequacy ratio.
KDB also plans to put 2 trillion won (US$1.43 billion) into a proposed bond fund
aimed at stabilizing the local debt market.
Min's remarks came as the government announced it would take market conditions
into account when selling KDB, hinting the sale of state-owned lenders may
proceed slower than planned.
South Korea plans to start reducing its 100 percent stake in KDB next year and
fully privatize the lender by 2012. KDB, established in 1954, engages mainly in
providing local companies with loans for capital spending.
sooyeon@yna.co.kr
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