Citi, SC Won’t Use Debt Guarantee Facility
By Kim Jae-kyoung
Staff Reporter
Citibank Korea and SC First Bank have declined to use the government's $100 billion bank debt guarantee, designed to help local lenders borrow abroad and thus ease concerns over a liquidity shortage here, saying they have sufficient access to cash.
However, the Korean corporate entities of two global financial groups ― Citigroup and Standard Chartered Bank (SCB) ― have decided to sign a memorandum of understanding (MOU) with the Financial Supervisory Service (FSS) to improve bank management and provide financial aid to smaller firms.
``Since we have a credit line from our parent company, SCB, it is possible to secure dollars anytime we wish,'' an executive at SC First Bank told The Korea Times, asking not to be named.
``Therefore, there is no need to sign an MOU regarding the debt guarantee. But we decided to ink an MOU on other aspects,'' he added.
Citibank Korea also decided not to join the debt guarantee program but the U.S. bank turned in an MOU on management improvement and lending to households and smaller enterprises late Tuesday.
The FSS requested 18 banks operating here to submit MOUs regarding both the debt guarantee facility and bank management by Monday, but only 16 local lenders, excluding the two, turned them in by then.
The financial watchdog has urged the banks to come up with detailed action plans on how to shore up capital bases, how to support smaller firms and wage reductions in exchange for the $100 billion debt guarantee.
Unlike foreign banks, local lenders are expected to resort to the government's rescue program as they are likely to face bigger challenges ahead amid a deepening economic slowdown.
``We don't need the government's debt guarantee facility at this moment. But chances are that we may use it in the near future,'' a local bank CEO told The Korea Times, asking not to be named.
``I think that banks will have tougher challenges in the first half of next year in line with an economic slowdown,'' he added.