The government said Tuesday that it will invest 1.65 trillion won ($1.24 billion) in three state-run lenders to help facilitate corporate loans and boost exports, according to Yonhap News.
The Ministry of Strategy and Finance said the capital injection will improve the capital adequacy ratio of Korea Development Bank (KDB), Export-Import Bank of Korea (Korea Eximbank) and Industrial Bank of Korea (IBK). The ratio is a key barometer of a bank's financial soundness, and measures the percentage of a bank's capital to its risk-weighted credit.
The total is a increase of 300 billion won from the 1.35 trillion won that Seoul said it would invest into the three banks on Nov. 3 when it announced its comprehensive economic recovery plan.
Of the total, 500 billion won will go to KDB and IBK each, with 650 billion won to be invested in Korea Eximbank, according to the ministry.
It said improvement in capital adequacy will allow these banks to lend more money to small- and medium-sized enterprises (SMEs) and help exporters who are hard pressed to get funds following the U.S. financial crisis and a general downturn in the global economy.
Policymakers said that if companies can overcome current challenges, they will be in a good position to grab increased market share once overall economic conditions improve in the coming years.
South Korea's economy is expected to fall to 4 percent growth this year, with most think tanks predicting the 2009 growth to drop further to less than 2 percent.