South Korea to guarantee maturing foreign loans amid credit crisis
South Korea announced measures Sunday to shore up its banks by guaranteeing their external debt and pumping more money into the banking sector amid the global financial crisis.
The government said it will provide up to $100 billion US to secure banks' maturing foreign currency debt for three years on loans taken out from Oct. 20 to June 30, 2009.
Minister of Strategy and Finance Kang Man-soo, Financial Services Commission chairman Jun Kwang-woo and Bank of Korea governor Lee Seong-tae made the announcement in a joint statement.
The government and Bank of Korea will also provide additional liquidity equivalent to $30 billion US to the banking sector by using foreign exchange reserves, the statement said.
The announcement came as analysts have questioned South Korean banks' ability to raise dollars to pay off maturing foreign loans amid the global credit crunch.
"Despite the recent credit crisis, [South] Korea's real economy and its financial sector are sound," the statement said, reiterating the government's position that fears about South Korea being vulnerable to the crisis were overblown.
The government has said its $240 billion US in foreign currency reserves is more than sufficient to see the country through the global liquidity crisis.
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