S. Korea, Italy, Pakistan cope with financial problems
SEOUL -- South Korea announced measures Sunday to shore up its banks by guaranteeing their external debt and pumping more money into the financial system amid the global credit crisis.
The government said it will provide up to $100 billion to secure banks' maturing foreign currency debt for three years on loans taken out from Oct. 20 this year until June 30, 2009.
The announcement came as analysts have questioned South Korean banks' ability to acquire dollars to pay off maturing foreign loans amid the global credit crunch.
In financial developments elsewhere:
• Italy's government is readying a plan to guarantee loans of troubled companies unable to secure financing from banks, the Italian newspaper La Repubblica reported Sunday.
• Pakistan's government said Sunday that it may have to accept politically unpopular aid from the International Monetary Fund to ward off possible economic meltdown if wealthy nations turn it down. Pakistan needs up to $5 billion to avoid defaulting on sovereign debt due for repayment next year.
As for Korean, Standard & Poor's Ratings Services said last week that it may downgrade its credit ratings for some of South Korea's biggest banks, citing concerns over their foreign currency funding.
"The government and the Bank of Korea together will further provide enough additional dollar liquidity to the bank sector," Minister of Strategy and Finance Kang Man-soo told reporters.
Kang, Financial Services Commission Chairman Jun Kwang-woo and Bank of Korea Gov. Lee Seong-tae made the announcement at a joint news conference.
The government and Bank of Korea will also provide additional liquidity equivalent to $30 billion to the banking sector by utilizing foreign exchange reserves, the three officials said in a statement.
The measures require approval by the National Assembly. Until that can be secured, either the Korea Development Bank or Korea Eximbank will provide the guarantees beginning Monday, they said.
South Korean banks' foreign debt reaching maturity by the end of June 2009 is estimated at about $80 billion, the statement said. It did not say when that debt was taken out.
Related Stories
ABC News Live