South Korea Lends a Hand as Liquidity Woes Spread to Asia ; CREDIT CRUNCH

Article excerpt

THE money-markets crisis spilled into Asia today as the South Korean government said it would intervene to boost liquidity for its banks.

South Korea, whose stock market has tumbled far more than others in the region, will use part of its $240 billion ([pounds]137 billion) of foreign reserves to give its banks access to foreign capital as western banks refuse to lend to the country.

While less dramatic than the actions in Europe at the weekend, Korea's move highlighted how interlinked the banking system now is.

Finance minister Kang Man-soo warned that the credit squeeze would hit emerging markets such as his, and it would be some time before the US bailout plan helped. He added: "Recently, our financial institutions began experiencing troubles in securing foreign-exchange liquidity.

The government judges that we need to deal with the situation pre- emptively while assuming the worst-case scenario." Meanwhile, the country's top financial regulator said he would encourage state-run banks such as Korea Development Bank (KDB) to try to expand borrowing abroad. …