The South Korean financial watchdog announced its plan to expand the supply of liquidity to small and medium firms (SMEs) facing financial difficulty amid the global financial turmoil, the Korea Herald reported Tuesday.
According to the Financial Services Commission (FSC), the Korea Credit Guarantee Fund and Kibo Technology Fund, the two credit guarantee agencies, decided to raise their guarantee bars on loans by SMEs to 95 percent next year, up from the current 85 percent.
The watchdog said the change is expected to provide a guarantee equivalent to an additional 1 trillion won (752 million U.S. dollars) to SMEs.
The FSC said that the two agencies will also provide about 3 trillion won (2.25 billion U.S. dollars) worth of liquidity to the corporate bond market.
The government will invest a total amount of 2.65 trillion won (1.99 billion U.S. dollars) in state-run banks to increase their lending capacity, it added.
The move is part of the South Korean government's broader plan to provide liquidity worth around 4.3 trillion won (3.23 billion U.S. dollars) to SMEs facing troubles from KIKO (knock-in knock-out) option, a currency derivative product, amid the global credit crunch.
Data from the Financial Supervisory Service (FSS) showed that a total of 571 companies suffered losses with the KIKO contracts, with combined loss of 1.69 trillion won (1.27 billion U.S. dollars) as of the end of August.
Source: Xinhua
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