`Fresh Aid to Banks to Come Without Gov`t Interference`

The government said yesterday that it will not intervene in bank management when it offers financial support to banks next month.

The first group of recipients is expected to comprise six financial institutions led by Woori Bank, the banking unit of Woori Financial Holdings.

The ruling Grand National Party and the Financial Services Commission Wednesday convened a meeting at the National Assembly with the Korea Federation of Banks and other banks. They discussed speeding up financial assistance for banks to help fight the credit crunch.

“The nation’s top financial watchdog will not intervene in bank management when the government offers financial support to banks through a state lending project,” a senior party official said yesterday.

“No strings will be attached in providing the assistance except for the condition that a substantial part of the loan benefit small and medium-size enterprises.”

The measure is intended to make it easier for domestic commercial banks to apply for the support program.

The administration and the party agreed to create a fund worth 20 trillion won (14.5 billion U.S. dollars) to alleviate the liquidity crunch in the financial market, but banks are shunning assistance apparently in fear of state intervention in management and a decline in their international credit ratings.

Five trillion won (3.63 billion dollars) will be injected in the first round of the program around the end of next month. The second will come in April when banks announce their performances of last year and their expected losses stemming from planned restructuring.

The first to benefit from the assistance are Woori Bank, Industrial Bank of Korea, Gwangju Bank, Kyongnam Bank, in which the government holds equity, the National Agricultural Cooperatives Federation, also known as Nonghyup, and the National Federation of Fisheries Cooperatives, or Suhyup.

koh@donga.com