South Korea’s KRW 11tn fund to aid its ailing shipping industry

The Government of South Korea plans to create a KRW 11tn ($9.5bn) fund to support restructuring of the nation’s shipping and shipbuilding industries. The move comes in line with the central bank’s decision to lower benchmark borrowing rates as part of pulling the nation’s economy out of its slump.

The government aims to start operating the fund from 1 July 2016 until the end of 2017.

According to South Korea’s Finance Minister Yoo Il Ho, the fund would buy hybrid bonds issued by state-run banks.

Separately, the finance ministry plans to inject KRW 1tn of capital into the Export-Import Bank of Korea by September 2016 to ensure Kexim’s capital ratio doesn’t fall by too much.

The government currently estimates that these lenders would require about KRW 5 – 8tn of capital, assuming that Korea Development Bank and Kexim meet BIS ratios of 13% and 10.5%, respectively. KDB’s ratio currently was at 14.6% while Kexim’s was 9.9%.

Source: Bloomberg

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