Major banks discuss ways to support S.Korea

Dec 30, 1997 01:00 AM

Several of the world's biggest banks have met to search for ways to keep troubled South Korean companies afloat by renewing loans or extending more credit, and major investment firms said they were ready to join the effort.
The talks were a crucial part of a broad plan to speed up financial assistance to South Korea, a push that has boosted confidence in recent days that the country will avoid a financial meltdown.
The IMF has put together a record $ 57 billion bailout for South Korea, with $ 10 bn to be delivered in January. But the country has a total of about $ 100 bn in foreign debt that must be paid or refinanced within a year.
The banks feel they must act in unison to renew their short-term loans or hand over more money if necessary. The concern is that if some pull out of the country, the rest will be left holding even riskier loans.
Few details were provided of the talks which took place at the Federal Reserve Bank of New York and later at the nearby headquarters of J.P. Morgan & Co.
New York Fed president William McDonough issued a brief statement saying that he "was pleased at the progress made.''
It was after the meeting at the New York Fed that investment firms Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley and Solomon Smith Barney issued a joint statement that they "are ready to participate in the programme of support for Korea.''
Also at the Fed meeting were officials from U.S. multinational banks such as Chase Manhattan, Citicorp, Bankers Trust New York and Bank of New York.
Joining the meeting at J.P. Morgan were representatives from Japan's Tokyo-Mitsubishi Bank, France's Societe Generale, Germany's Deutsche Bank and Britain's HSBC Holdings. HSBC said that it already had decided to renew its loans to Korean banks. There also were recent reports that Tokyo-Mitsubishi and Lloyds Bank of Britain had rolled over loans.
The talks helped boost U.S. banking stocks, which had been hurt recently because of concerns about their exposure to South Korea and other parts of Asia.
South Korea's parliament has passed a financial reform package aimed at sharpening its ability to regulate its banking system and encouraging more foreign investment.
"In the name of global financial stability, the events over the last week must be viewed as constructive,'' said David Rosenberg, senior economist at Nesbitt Burns Securities in Chicago. "Down the road these moves will prove beneficial, just as they did in Mexico. "I'm not trying to say we're out of the woods. The critical question will come in the next few weeks, when we see how much international confidence is boosted by these moves.''
South Korea's currency has surged in recent days after the IMF and major industrialised countries announced they would speed up delivery of $ 10 bn in loans from the bailout package.

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