|
The Financial Services Commission told President Lee Myung-bak on Thursday that a W20 trillion fund will be created to bolster the capital reserves of major banks in Korea (US$1=W1,291). The FSC also decided to ease accounting standards for businesses, allowing them to re-evaluate their assets to prevent companies from shifting into the red due to the weak won.
The FSC said the Capital Expansion Fund will be created with the Bank of Korea pitching in W10 trillion, the state-run Korea Development Bank W2 trillion and the remaining W8 trillion coming from institutional and ordinary investors.
The FSC plans to use the fund to bolster capital reserves of banks by purchasing their preferred shares, hybrid debt and subordinated bonds. If the entire W20 trillion is used, the BIS capital adequacy ratios of Korea's major banks are expected to rise 2.6 percentage points from the end of September to around 13 percent.
In a separate move, the Korea Housing Financial Corporation plans to help bolster BIS capital adequacy ratios at banks by purchasing W7 trillion worth of mortgage-backed securities, while the Korea Asset Management Corporation will buy W3 trillion worth of non-performing loans.
The FSC said it will allow companies to re-evaluate their assets by recalculating the value of their real estate and machinery according to market rates rather than according to the price they paid for them. The measure is designed to help businesses produce better account settlements at the end of the year. A similar mechanism was introduced for a limited period at the height of the Asian financial crisis in late 1998.
Kwon Hyuk-Se, a member of the standing committee at the Securities & Futures Commission, said most companies are facing a crisis where they will have to settle their account books posting deficits this year due to the weak won even though they performed well. "The measure is designed to keep businesses from losing credit lines with banks due to their deficit accounts, while staying within the boundaries of international accounting standards."
(englishnews@chosun.com )
|
