S Korea to buttress financial industry against economic stress

SEOUL : South Korea will change regulations to buttress financial companies against economic stress, the deputy chief of the financial regulatory agency said on Thursday, moving to head off problems that have twice hit the country since the late 1990s.

Korea Deposit Insurance Corporation (KDIC) would be allowed to provide support to financial companies before they failed or to prevent a developing economic crisis from hitting the financial industry, said Kim So-young, vice chairman of the Financial Services Commission.

Under current rules, the deposit insurance agency can intervene in the liquidation process of a failed financial company but has no right to help one pre-emptively - for example, by recapitalising it as it weakens.

Kim revealed the plan at a meeting of senior officials from the commission, Financial Supervisory Service and the KDIC amid growing fears of a global recession and its effect on the local economy and markets.

During the Asian financial crisis of the late 1990s, South Korea barely averted a sovereign debt default thanks to assistance led by the International Monetary Fund. It also suffered massive capital flight during the global crisis of 2008 and 2009.

In both cases, financial companies, such as banks, suffered severe loss of liquidity, worsening the crises.