October 19, 2008

S. Korea Guarantees Banks’ Foreign Debts

South Korea Sunday said it will provide $100 billion in state guarantees on banks' foreign debts in an effort to combat a dollar shortage in the country.

The move is also aimed at bolstering confidence in South Korea's financial markets, Yonhap, the South Korean news agency, reported Sunday.

The South Korean Finance Ministry, the Bank of Korea and the country's Financial Services Commission made the joint announcement Sunday as part of an emergency conference on the global financial crisis being held in Seoul.

At the meeting, they also announced they will tap their foreign reserve holdings to supply $30 billion worth of U.S. dollars to local banks and exporters, adding to an earlier $15 billion injection into the financial system, Yonhap reported.

"As other major economies start providing guarantees to inter-bank loans, the Korean government will take similar measures to avoid placing domestic banks at a relative disadvantage in terms of overseas funding and to allay fears in the financial markets," a statement jointly issued by chiefs of the three government bodies said.