South Korean government officials on Wednesday agreed to pour more public funds into the restructuring of troubled financial institutions in a major turnaround of policy.
The agreement came at talks between top policymakers from the finance and economy ministry and the governing Millennium Democratic Party, ministry officials said.
Earlier the government had promised to recover 30 trillion won ($27 billion) of public funds already spent on restructuring banks.
"The change is inevitable," Finance and Economy Minister Jin Nyum told reporters, acknowledging the need for extra funds to complete the government's reform drive.
The amount of additional funds will be determined later but researchers have suggested the completion of bank reform could require some 42 trillion won on top of the 64 trillion won already pumped into banks in the past two years.
The government has tried to recover some of its investments by selling its stakes in nationalized banks kept alive with public funds.
But the sale of government shares has been hampered by the sluggish stock market and public fears that the raising of more funds to ready the banks for sale would fall on taxpayers.
Public funds would be required to raise the capital adequacy ratio of undercapitalized institutions including
state-controlled banks Hanvit, Cho Hung and Korea Exchange Bank.
The government plans to consolidate the banks by allowing a holding company to take control of all three.
Many South Korean institutions have been reorganized through the injection of state funds since Asia's economic crisis forced Seoul to receive a 58-billion-dollar bailout from the International Monetary Fund (IMF) in late 1997.
Banks have been required to improve their financial structure by reducing non-performing loans and enhancing credit risk management. — (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
