S. Korea to bolster financial industry against economic strains

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SEOUL (Reuters) – South Korea will change its regulations to protect financial firms from economic stress, the deputy head of the financial regulatory agency said on Thursday, seeking to head off the problems that have plagued the country. twice since the late 1990s.

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

Under current rules, the deposit insurance agency can intervene in the process of winding up a bankrupt financial company, but is not allowed to help it preventively – for example, by recapitalizing it when she is weakening.

Kim revealed the plan at a meeting of senior officials from the commission, financial watchdog and KDIC amid growing fears of a global recession and its effects on the local economy and markets.

During the Asian financial crisis of the late 1990s, South Korea narrowly avoided defaulting on its sovereign debt 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 liquidity losses, worsening the crises.

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