ID :
36472
Fri, 12/19/2008 - 15:04
Auther :
Shortlink :
http://m.oananews.org//node/36472
The shortlink copeid
(EDITORIAL from the JoongAng Daily on Dec. 19) - Time for banks to act
The Financial Supervisory Commission has decided to raise a 20 trillion won ($15.2 billion) fund to complement capital for banks in January next year.
Although the measure is belated, it has finally decided that the Bank of Korea
will invest 10 trillion won, the Korea Development Bank 2 trillion won and
institutional or ordinary investors, 8 trillion won.
This will protect banks??? soundness from problems that might emerge with the
looming downturn in the real economy and in the course of restructuring.
According to the FSC, if the entire 20 trillion won fund is provided to banks,
domestic banks??? BIS ratio, which was 10.86 percent as of the third quarter this
year, will go up by 2.65 percent. That means banks will become stronger and more
capable of lending money to companies.
On top of this, the Korea Housing Finance Corporation has decided to buy
mortgage-backed bonds of up to 7 trillion won from financial companies. The Korea
Asset Management Corporation has also decided to buy nonperforming loans worth 3
trillion won.
These moves are aimed at pre-emptively eliminating factors that might make banks
unhealthy. As their capital is complemented and pressure from potential
nonperforming loans is cleared, banks should become stronger.
The next step is for banks to face up to the economic crisis. Banks have
refrained from lending in fear of potential defaults, which would drag down their
capital adequacy ratios.
This caused a credit crunch and no matter how much the central bank lowered the
key interest rate, market interest rates have not gone down. Banks can now stop
worrying about such concerns and can carry out their function as mediators of
capital in the market.
Banks should no longer sit on their capital. They need to take a more active role
in restoring companies and reviving the economy.
This doesn???t mean that banks should carelessly provide any company with capital
without going through the proper risk assessment. Banks must discern what is an
essential and healthy business from what is not.
But banks should provide capital more actively. There is a need to establish
regulations that civil workers and bank employees who work for the supply of
capital and restructuring won???t be held accountable later for their work and
its results.
(END)
Although the measure is belated, it has finally decided that the Bank of Korea
will invest 10 trillion won, the Korea Development Bank 2 trillion won and
institutional or ordinary investors, 8 trillion won.
This will protect banks??? soundness from problems that might emerge with the
looming downturn in the real economy and in the course of restructuring.
According to the FSC, if the entire 20 trillion won fund is provided to banks,
domestic banks??? BIS ratio, which was 10.86 percent as of the third quarter this
year, will go up by 2.65 percent. That means banks will become stronger and more
capable of lending money to companies.
On top of this, the Korea Housing Finance Corporation has decided to buy
mortgage-backed bonds of up to 7 trillion won from financial companies. The Korea
Asset Management Corporation has also decided to buy nonperforming loans worth 3
trillion won.
These moves are aimed at pre-emptively eliminating factors that might make banks
unhealthy. As their capital is complemented and pressure from potential
nonperforming loans is cleared, banks should become stronger.
The next step is for banks to face up to the economic crisis. Banks have
refrained from lending in fear of potential defaults, which would drag down their
capital adequacy ratios.
This caused a credit crunch and no matter how much the central bank lowered the
key interest rate, market interest rates have not gone down. Banks can now stop
worrying about such concerns and can carry out their function as mediators of
capital in the market.
Banks should no longer sit on their capital. They need to take a more active role
in restoring companies and reviving the economy.
This doesn???t mean that banks should carelessly provide any company with capital
without going through the proper risk assessment. Banks must discern what is an
essential and healthy business from what is not.
But banks should provide capital more actively. There is a need to establish
regulations that civil workers and bank employees who work for the supply of
capital and restructuring won???t be held accountable later for their work and
its results.
(END)
