(LEAD) BOK board approves W10 tln recap fund for corporate restructuring

(ATTN: UPDATES with additional information, minor changes in paras 3-8; ADDS photo)

SEOUL, July 1 (Yonhap) -- The decision-making board of South Korea's central bank gave its final approval Friday to the establishment of a 10-trillion-won (US$8.7 billion) fund to help finance the government-led restructuring in the troubled shipping and shipbuilding industries.

The decision came at a special meeting of the monetary policy board, the Bank of Korea (BOK) said.

The money will be used to extend fresh loans to the state-run Industrial Bank of Korea (IBK), which in turn will provide necessary funds to local companies undergoing government-led restructuring.

"The board will review each request for loans before deciding whether they will be extended," the central bank said in a press release.

Each new loan will have a maturity of a maximum one year, while the 10-trillion-won fund will altogether expire at the end of next year, it added.

The BOK also made it clear the fund was not designed to aid troubled private companies.

"Recapitalizing state-run banks is basically the responsibility of government financial authorities," the bank said.

"As the recapitalization fund is not aimed at supporting insolvent firms, but at minimizing financial uncertainties stemming from a possible shortage of funds experienced by the policy lender, whether an actual loan will be extended will be decided after thoroughly reviewing the possibility of such uncertainties," it added.

Friday's meeting of the board came after the central bank agreed to set up an 11-trillion-won recapitalization fund in a three-way meeting that also involved the finance ministry and the top financial regulator, the Financial Services Commission. The IBK will shoulder the additional 1 trillion won.

bdk@yna.co.kr
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