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Private Banks to Also Get `Capital Expansion Fund`

Posted February. 16, 2009 03:55,   


The government yesterday said it will expand eligibility for its “capital expansion fund” to private banks including Kookmin, Shinhan and Hana.

The fund had been restricted to state-run banks with relatively weak financial strength, such as Woori and Kwang Ju.

“To push a more bold restructuring, capital should be further expanded,” said a senior financial authority official. “If capital is injected only into certain banks, it will give the impression that only the recipient banks are ailing, possibly weakening the effect of the policy.”

Experts said the government is using the fund as leverage to take the lead in restructuring. Expanding capital in all banks will also prevent the widespread collapse of businesses when corporate restructuring accelerates.

Financial Supervisory Commission Chairman Chin Dong-soo and Financial Supervisory Service Governor Kim Jong-chang yesterday held a workshop with the heads of banks on using the capital expansion fund at the Korea Banking Institute in downtown Seoul.

Attending the meeting were the heads of Korea Development, Kookmin, Shinhan, Woori, Hana, City and Kwang Ju banks, Nonghyup Credit and Industrial Bank of Korea.

Chin and Kim said pumping the fund worth 20 trillion won (14.2 billion U.S. dollars) into private as well as state-run banks is appropriate. Private banks have avoided the fund for fear of state intervention in management.

State-run banks whose capital adequacy ratios as set by the Bank for International Settlements fell below 12 percent last year will apply for the fund next week. They include Kwang Ju, Kyongnam, Nonghyup and Suhyup.

The government, however, said Kookmin, Shinhan and Hana, whose capital adequacy ratios exceed 12 percent, should also receive the fund to push restructuring throughout the banking industry.

legman@donga.com jaeyuna@donga.com