SEOUL: South Korea's financial regulator promised Monday to supply liquidity and buy loans linked to soured property deals to try to calm jitters after six savings banks were suspended.
Financial Services Commission Kim Seok-Dong said in a statement that the government will ease financial restrictions on the Korea Federation of Savings Banks so it can provide adequate liquidity to lenders in need.
The authority last week suspended the operations of six saving banks, including the, country's largest in terms of assets, the Busan Savings Bank, due to insufficient liquidity.
It is trying to avert the risk of a systemic shock caused by those banks that are suffering from a downturn in the real estate market.
"We do not expect additional suspensions in the first half of the year in the absence of excessive deposit withdrawals," Kim said.
He said the government also plans to buy about 3.5 trillion won ($3.14 billion) in bad real estate project loans held by savings banks through the state debt-clearer, the Korea Asset Management Corp.
The initiative needs parliamentary approval.
The Financial Services Commission also said it would start partially repaying deposits of customers of the suspended savings banks a week earlier than usual.
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