This press release was prepared by the government to inform the general public of the major points of the fourth Economic Measure Coordination Meeting that was held at Cheongwadae on April 14th, 1998. It was presided by President Kim Dae-Jung.
At the time, Korea was severely hit by the Asian financial crisis and it was therefore receiving aids from the International Monetary Fund, which led to the contraction of the domestic economy, uncertainty in the financial market and soaring corporate bankruptcies. To put an end to this economic crisis, the government believed that the exit and systematic restructuring of problematic companies and insolvent financial institutions were the most urgent tasks at hand, and it consequently prepared drastic policy measures.
The measures announced targeted two entities: companies and financial institutions.
First of all, the government decided to reduce the taxes that it applies to the liquidation of real estate and create real estate trust products for companies that suffer from a shortage of funds due to excessively high exchange rates, sluggish domestic consumption and credit rating downgrade. These measures were designed to help companies reduce their debts and acquire liquidity. Restructuring funds were injected into select companies with a good standing, and a special measure to support small- and medium-sized companies was created. Additionally, a company specialized in corporate restructurings was founded in order to facilitate corporate restructuring.
In regards to the restructuring of financial institutions, the government will instruct them to sell non-performing assets, to raise the BIS ratio and to borrow in foreign currency. Otherwise, the government will liquidate insolvent financial institutions because it believes that having banks that are in good financial shape and that have valuable assets is essential to achieving corporate restructuring.
As part of those measures, the government’s stake in Seoul Bank and Korea First Bank will be sold off. The sale will be handled by a task force made up of members of the Financial Supervisory Commission, and the losses that occur due to the sale will be dealt with by Seoul Bank and Korea First Bank Bank Privatization Committee at the Ministry of Finance and Economy by consulting related government ministries. In addition, a business normalization plan for banks with vulnerable capital adequacy ratios will be implemented promptly and the merger between big banks that are in good financial shape will be encouraged. The restructuring of non-bank institutions such as securities firms and insurance companies will be led by their major shareholders, the restructuring of investment companies will be carried out depending on the market conditions and the bailout of lease companies will be implemented by the banks, their parent companies.
Furthermore, financial institutions will be divided into three or five groups according to their financial soundness, and different measures for each group will be imposed. The restrictions on bank ownership will be eased to facilitate financial the institutions’ restructuring process.
4차경제대책조정회의(Press release - major points of the fourth economic measure coordination meeting)
[서울] : 한국개발연구원
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy
Economy < Economic Administration
|Holding||한국개발연구원; 한국개발연구원 국제정책대학원|