Top Gov't Officials United in Call to Kick Marginal Firms Out of Market

MOSF Minister Kang, BOK Gov. Lee, FSC Chairman Jun speak at the New Year's meeting of financial institution chiefs

Sinister of Strategy and Finance Kang Man-soo urged financial institution chiefs to distinguish viable companies from marginal ones and provide full liquidity for the former, but send the latter out of the market.
Kang told the New Year's meeting of financial institutions chiefs held at the Seoul Shilla Hotel, "After separating the good ones from the bad ones, viable companies need to be supplied with sufficient liquidity whereas marginal firms should be sent out of the market immediately." The financial and corporate sectors need to dispose of would-be nonperforming loans and assets and build up a basic constitution to brace for the sagging economy, and to this end, banks have to take preemptive measures to increase their capital, he said.
Kang also asked financial institution chiefs to aggressively draw foreign currency loans by capitalizing on the $100 billion government loan guarantee in order to ease the financial woes households are suffering due to declining incomes and asset values by lowering interest rates and rescheduling loan repayments. His comment came at a time when the construction and shipbuilding industries have picked up steam in their restructuring efforts and automobile and IT companies, fraught with a shortage of cash, are in a similar situation.
Financial Services Commission (FSC) Chairman Jun Kwang-woo echoed Kang's remarks. "If the financial industry performs its role of supporting the real economy and expediting growth without a hitch, even the current economic crisis may be translated into new opportunities to achieve greater growth."
In a speech, Bank of Korea (BOK) Governor Lee Seong-tae stressed the need for banking institutions to boost capital on their own. "It is essential for banks to do their best in ramping up their capital in order to have more room to provide liquidity. Securing sufficient equity capital would lead to corporate restructuring, thus reducing economic uncertainties."
The MOSF minister also said the government has responded in a decisive and sufficient manner to the unprecedented crisis.
The government plans to inject 140 trillion won, equivalent to 15 percent of Gross Domestic Product (GDP), into expanding fiscal spending, liquidity support and tax reductions.
In an effort to ease the shortage of liquidity facing the financial market, he said the government is injecting approximately 90 trillion won into the market -- 20 trillion won in Korean currency and 70 trillion won in foreign currencies. It has already injected 51 trillion won in fiscal spending and tax reduction to take preemptive measures against the slumping economy and help turn around the economy, Kang said.
The minister said the government has laid a solid foundation to stabilize the foreign exchange market by securing $190 billion -- $90 billion in dollar swap agreements reached among the United States, Japan and China and a $100 billion payment guarantee, provided by the Korean government -- in order to set the second line of defense against the plummeting value of the Korean currency vs. foreign currencies. The combination of liquidity supply, tax reductions, fiscal spending and financial support for the formation of the second line of defense would swell to about 35 percent of GDP.
Among the approximately 5,000 people at the gathering were Park Byung-won, senior presidential secretary, Rep. Kim Young-sun, chairman of the National Assembly National Policy Committee, Rep. Lee Jong-ku, Rep. Kang Kil-bu and Rep. Na Sung-lin.
The meeting coincided with the presentation ceremony of the Dasan Financing Awards by the Korea Economic Daily. The 2009 Dasan Grand Prize winner was not announced due to the lingering financial crisis. The Dasan Gold Prize went to Pusan Bank President Lee Jang-ho in the provincial banking category; Seoul Guarantee Insurance Company President & CEO Baang Young-min in the insurance category; Samsung Credit Card President Yoo Seok-ryeol in the credit category; and Samsung Securities Co. President Park Jun-hyon in the securities and trust investment category. Korea Asset Management Corp. President and CEO Lee Chol-hwi was presented with the Special Dasan Award. nw

Minister of Strategy and Finance Kang Man-soo, Financial Services Commission Chairman Jun Kwang-woo and Bank of Korea Gov. Lee Seong-tae pose for a group photo at the New Year's meeting of financial institution chiefs held at the Shilla Hotel in Seoul on Jan. 5. The participants included Senior Presidential Secretary for Economy Pahk Byong-won, FSS Gov. Kim Jong-chang, Rep. Lee Jong-koo, Rep. Bae Young-shik, Korea Securities Dealers Association Chairman Hwang Gun-ho, and Korea Federation of Banks Shin Dong-kyu.