6 Bank to Get Piece of Recapitalization Fund
By Yoon Ja-young
Staff Reporter
Bank recapitalization fund will be launched this week. Around six banks are expected to get the money injected from the government fund to pull up the BIS ratio, or the measure of banks' financial soundness.
Financial Services Commission Chairman Chin Dong-soo asked banker leaders to use the fund that government plans to launch to help banks improve financial soundness, at his first official meeting with them since his inauguration as the head of the financial regulator at the Korea Banking Institute, Sunday afternoon.
The government plans to set up some 20 trillion won fund for the banks, but banks have shown reluctance on the concern that the government might be meddling in management. Chin made it clear that the government wouldn't be intervening in the management even if the banks get the support from the fund.
According to local media, the financial regulator is scheduled to launch the fund this week and get application from the banks. Woori Bank, Kwangju Bank, Kyongnam Bank, Industrial Bank of Korea, Nonghyup, or the farmers' bank, and Suhyup, or the fishermen's bank, are expected to apply for the fund as they don't meet the financial regulator's recommended BIS ratio of 9 percent.
Chin requested banks to increase lending on small businesses. He stressed that the firms that got full guarantee by credit guarantee funds should get bank loans without additional screening.
The central bank has been cutting key rates ― recently to a historic low of 2 percent ― to ease liquidity in the market, but all in vain. Lenders have been refraining from extending loans to small businesses and households on the growing risk and sliding economy. Loans on small businesses grew by 2.7 trillion won in January, which is only one third of the 7.7 trillion won increase seen a year ago.
Korea Institute of Finance said that the concern is growing that the economy might fall in to a liquidity trap, with the key rate cut not helping to increase corporate investment or household spending.
The bankers present at the meeting said that Chin strongly criticized banks for losing trust from customers, not giving them loans when they are in need of money.