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S Korea guarantees foreign loans S Korea guarantees foreign loans
(about 1 hour later)
South Korea's government has agreed to guarantee foreign-currency borrowing by country's banks to help stabilise financial markets. South Korea's government has agreed to guarantee foreign-currency borrowing by the country's banks to help stabilise financial markets.
The finance ministry, central bank and financial services commission said the government expected about $100bn of borrowing to be covered by the package. The finance ministry, the central bank and the financial services commission said about $100bn of borrowing would be covered by the package.
A further $750m will be injected into the Industrial Bank of Korea, so it can expand lending to small businesses. The government will also provide $30bn of liquidity to banks, and there will be more aid to small businesses.
The economy of South Korea is the third largest in Asia and 13th in the world. South Korea's economy is the third largest in Asia and 13th in the world.
It enjoys major export success in a number of manufacturing industries, but especially shipbuilding, car-making, and electronics.It enjoys major export success in a number of manufacturing industries, but especially shipbuilding, car-making, and electronics.
However, analysts say the country has appeared particularly vulnerable to the global credit crisis because its banks lacked sufficient dollars to service maturing foreign debt.However, analysts say the country has appeared particularly vulnerable to the global credit crisis because its banks lacked sufficient dollars to service maturing foreign debt.
In a statement, the government said it would guarantee for three years all external debt taken on by South Korean banks before 30 June 2009 in order "to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market".In a statement, the government said it would guarantee for three years all external debt taken on by South Korean banks before 30 June 2009 in order "to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market".
Along with the Bank of Korea, it will also provide an additional $30bn of dollar liquidity to the banks by utilising foreign exchange reserves. A further $750m will be injected into the Industrial Bank of Korea, so it can expand lending to small businesses.
The government said that despite the crisis, the economy and the financial sector were "sound", and that its foreign exchange reserves were "sufficient".The government said that despite the crisis, the economy and the financial sector were "sound", and that its foreign exchange reserves were "sufficient".
The US, the EU and other governments have also announced multi-billion dollar packages aimed at stabilising markets.