The South Korean government and central bank agreed to come up with detailed plans on how to finance structural reform in the country’s shipbuilding and shipping sectors while minimizing any adversary effect on the overall economy by the end of the first half.

According to the Ministry of Strategy of Finance, Vice Finance Minister Choi Sang-mok on Wednesday led the first meeting of a taskforce of high-ranking officials from the government, central bank and other relevant bodies to discuss measures to raise capital for state-run Korea Development Bank (KDB) and Export-Import Bank of Korea that are heavily exposed to indebted companies in the shipbuilding and shipping sectors. The meeting was attended by Financial Services Commission’s Financial Policy Bureau Director General Kim Yong-beom, Bank of Korea (BOK) Deputy Governor Yoon Myun-shik, Financial Supervisory Service Deputy Assistant Director Min Byung-hyun, KDB Vice Chairman Song Moon-sun and Korea Eximbank Executive Director Shin Deog-yong.

At the meeting, they agreed to increase capital for the state-run lenders as a part of “contingency plan” to promptly respond to uncertainties in the financial market that could increase in the course of corporate restructuring in the ailing shipping industry. They also agreed to review a mix of various fiscal and monetary policies to aid corporate restructuring.

The currently proposed measures could include raising capital for the Korea Eximbank through joint investment from the government and central bank, the BOK buying contingent convertible bonds (CoCos) issued by the Korea Eximbank and bonds issued by KDB to increase their liquidity, as well as the government and the BOK jointly forming fund. The taskforce group has also decided to discuss measures based on different scenarios such as possibly injecting over 5 trillion won ($4.3 billion) to the Korea Eximbank that urgently needs additional funds and raising over 10 trillion won to counter worsening business conditions in the shipbuilding sector. It would first raise capital for the Korea Eximbank as there is no need to revise law, said an unnamed government official.

By Cho Si-young and Chung Seok-woo

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