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As a way to extend liquidity support to the SMEs, the government said it will provide them with W4.3 trillion this year, up as much as W3.3 trillion from its original plan, in support funds through government-owned banks such as the Korea Development Bank and the Industrial Bank of Korea. It will also increase the loan guarantee money for SMEs at the Korea Credit Guarantee Fund and the KIBO Technology Fund by W4 trillion.

If banks voluntarily expand new loans for SMEs, the government will operate programs to extend guarantees and various incentives through credit guarantee agencies by June next year.

To SMEs that have suffered huge loss from the currency option derivative KIKO (knock-in, knock-out) but are deemed likely to recover, banks will give loans to the extent of their KIKO loss, extend maturity of their loans, and convert their loans into common shares.

The government plans to provide special guarantees through credit guarantee firms for victims of the KIKO program when they apply to banks for new loans. In effect, the loss of individual enterprises and banks will be covered by the taxpayers, an idea raising fears in some quarters of a moral hazard for executives.

(englishnews@chosun.com )