South Korea announces bank bail-out

South Korea has announced measures to shore up its banks by guaranteeing their external debt and pumping more money into the banking sector.

A joint statement today from the South Korean government and central bank says the government will provide up to €74.5bn to secure banks’ maturing foreign currency debt for three years on loans taken out from October 20 this year until June 30, 2009.

The statement also says the government and Bank of Korea will provide additional liquidity equivalent to €21.4bn to the banking sector by utilising foreign exchange reserves.

The announcement comes as analysts have questioned South Korean banks’ ability to raise cash to pay off maturing foreign loans amid the global credit crunch.

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