SEOUL: South Korea unveiled yesterday a fresh package of measures to help beleaguered credit card firms overcome a liquidity crunch that was triggered when a corporate accounting scandal led to heavy selling of their bonds.
An official said the government had ordered swift and decisive action to head off wider financial instability at a time when Asia’s fourth largest economy is cooling rapidly.
“We cannot rule out the possibility that problems at credit card companies could pose a threat to financial stability and the economy,” Vice–Finance Minister Kim Gwanglim told reporters.
Banks, brokerages and insurance companies would set aside five trillion won (US$3.99bil) in funds so they could buy bonds issued by credit card firms, he said.
The money would be used to buy about half the estimated 10.4 trillion won in card-company bonds owned by investment trust firms falling due between April and June, he said.
At the same time, Kim said, credit-card companies would be required to shore up their balance sheets by replenishing their capital by 4.6 trillion won instead of two trillion won as previously planned.
Furthermore, the Korea Asset Management Corp (Kamco) would buy more than four trillion won in bad loans held by credit-card firms, an official at the Financial Supervisory Commission (FSC) said.
Kamco is a state-run agency that was established after the 1997–98 Asian financial crisis to acquire non-performing loans from ailing banks and other financial institutions. – Reuters
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