Minister Jin hints at more bank mergers

The government has decided to promote the junk-bond market, in which non-performing bonds or bonds with credit ratings below the speculative level of BB could be traded. In addition, it will encourage additional mergers among healthy banks following that between Kookmin Bank and Housing &Commercial Bank (H&CB).

Finance-Economy Minister Jin Nyum unveiled a package of reform measures for capital markets with these highlights at an opening ceremony of the stock exchange on Yoido, central Seoul, Tuesday. He said that nothing would be more important than to revive the sagging bond market and his ministry will make intensive efforts to promote the junk-bond market so that the bond market could regain its function of corporate financing.

The government`s plan to promote the junk-bond market is aimed at repurchasing CBO (collateralized bond obligations) and high-yield funds which will become due soon, after they were created last year to digest the bad loans of banks.

In a meeting with reporters at the Kwachon government office complex, Minister Jin noted that banks engaged in corporate financing had not undergone enough restructuring and reforms are on the way for these banks.

Analysts regarded Jin`s remarks as an indication there would be additional mergers among healthy banks. Jin also said that the government will take measures to stabilize investors` sentiments and revive the system of capital markets instead of direct measures to boost the stock market.

Choi Young-Hae moneychoi@donga.com