Korea on the Load Ahead

Korea on the Road Ahead

Bank Recapitalization Fund

The Bank Recapitalization Fund was established on February 25, 2009 to enable banks to sufficiently support the real sector and lead the restructuring process.

Structure of the Fund

Structure of the Fund

Progress

  • Commercial banks, IBK, NACF, and NFFC can access funds within their access limits.
  • During the first phase of formation, KRW 12 trillion was injected into the Fund and the access limits were set in proportion to the banks' asset size.
  • In the second phase, candidate banks and the interest rates will be determined by their individual management performances of the funds previously injected.

Financial Stabilization Fund

  • The Financial Stabilization Fund was established within the Korea Policy Banking Corporation (KPBC) on March 13, 2009 to include non-banking financial companies in capital injection.
  • [Usage]
    Provide loans, guarantees and capital injections to financial companies
  • [Composition]
    Issuance of government-backed bonds
  • [Candidates]
    All financial companies including banks, non-banks, specialized credit companies
  • [Management]
    MOUs signed with the financial companies to improve financial support for the real sector, as well as to conduct regular inspections.

Purchasing of Banks?Non-performing Loans

The Corporate Restructuring Fund was established within the Korea Asset Management Corporation (KAMCO) on March 13, 2009.

  • [Usage]
    Resolve insolvent corporate bonds obtained by financial companies
  • [Composition]
    Issuance of government-backed corporate restructuring bonds
  • [Period]
    The Fund will be temporarily managed until the end of 2014
  • [Distribution]
    The distribution of funds at the end of management period will all be returned back to the government.

Support for Corporate Restructuring

To ensure that the restructuring efforts go smoothly and effectively, the Korea on the Load Ahead (FSC) and the Financial Supervisory Service (FSS) have joined to create the Corporate Credit Support Task Force on November 28, 2008.

  • Inspection support for corporate difficulties and financial structure enhancements
  • Temporarily in operation until the end of November 2009.

Creditor-led restructuring process began on February 19, 2009

Liquidity Support

Singed currency swap agreement with the U.S. on October 30, 2008

The Bank of Korea (BOK) injected capital via repos (RP) to securities companies and asset management companies in supporting the sudden shortage of liquidity in November 2008.

Support Structure through RPs

Support Structure through RPs

Preemptive support of domestic currency liquidity through the BOK's purchase of RPs and TBs

The Bond Market Stabilization Fund was established on November 13, 2008 to ease credit crunch caused by market distortions.

The government has collaborated efforts with the BOK to provide US$16 billion of support to import-export financing.

The 'Overall Economy Financial Support Task Force' was created on December 24, 2008. It led the 'Win-Win Guarantee Program' in support of providing SMEs that collaborate closely with major corporations credit guarantees and long-term loans with low interest rates.

Financial Support for SMEs

  • Utilized 'Fast Track' to supply liquidity and speedup restructuring.
  • Issued P-CBOs to help companies that experience difficulty in issuing corporate bonds.
  • Announcement of guarantee support through the Korea Credit Guarantee Fund (KODIT) and Kibo Technology Fund (KIBO) on February 12, 2009.
    Extending of all guarantees maturing in 2009
    Lowering requirements to new guarantee applications and expanding guarantee amount
    100% guarantees to 'Green Growth' related core businesses and technologically advanced companies
    Drastically shortening application process for guarantees
    Expand guarantee support to small and petty business owners
  • Expand total amount of SME support through policy banking institutions (Korea Development Bank & Industrial Bank of Korea)
    2008 results - KRW 32 trillion (KDB - 8tn, IBK - 24tn)
    2009 target - KRW 44 trillion (KDB - 12tn, IBK - 32tn)

Micro-Finance Support

Announcement for residential finance support and system enhancements on January 21, 2009 through lease-deposit repayment guarantees and interest rate cuts for residential mortgage loans (0.50%p)

Credit card transaction fee cuts to street-market merchants (2.0~3.5% 2.0~2.2%)

Debt restructuring (Pre-workout) plans initiated on March 10, 2009

  • Preventive measures to help short-term delinquent individuals (1~3 months) from becoming a delinquent debtor.
  • Credit Recovery Support Task Force launched
  • Allow rescheduling of debt repayment, but limit the occurrence to one

Debt Rescheduling Process

Debt Rescheduling Process

97 Yeoui-daero, Youngdeungpo-gu, Seoul, 150-743 Korea, TEL:+82-2 2156-8000 Copyright Financial Services Commission. All Rights Reserved.