Bank of Korea pumps $550m into market

Bank of Korea pumps $550m into market

SEOUL (AFP): The central bank said yesterday it had pumped another 490 billion won (US$550 million) into South Korea's financial system to ease a liquidity squeeze caused by Kia Group's woes.

The amount supplied through repurchase agreements was in addition to the one trillion won the central Bank of Korea (BOK) injected, also through repurchase agreements immediately after Kia Group was put under bank protection July 15.

The banks' move to protect Kia, the country's largest eighth largest conglomerate and third biggest car maker, has sent the stock market plunging, with banks already hurt by a string of corporate failures, the worst hit.

The BOK said it planned to continue to supply the liquidity necessary to reduce the Kia impact, but would seek to ensure it did not upset the stability of the country's foreign exchange and call markets.

Yonhap news agency meanwhile quoted bank officials as saying that Kia's main creditor bank, Korea First Bank, had asked the BOK to grant it preferential loans carrying three percent interest per annum.

Seoul Bank also plans to ask for similar loans, Yonhap quoted the officials as saying.

The banks are expected to have difficulty in raising funds overseas largely because of their exposure to the nearly insolvent Kia Group on the heels of the string of corporate failures that started with the collapse of the Hanbo Group in January.

Meanwhile, thousands of union workers at South Korea's third largest auto maker said Friday they would work through their summer vacations to save their company from its financial woes.

"This is our company and we will do everything we can to save it from going bankrupt or from any difficulties it is going through," a union official of Kia Motors told AFP.

He said the 18,000 members had agreed to skip their summer vacations this year and also give up their bonuses, totaling about US$1,120 per person.

The union would also launch campaigns to collect money to help save Kia Motors, a major unit of Kia Group, he said.

"These are our plans, and next week we should have details of how we will go about the donation campaigns," he said.

The union official at Kia Motors, the world's 16th biggest auto maker, said the union had told management workers would "stake their lives" to help the company but that it was against any lay-offs.

"We will do all we can to save this company. But we are against firing people. There are other ways to do this," the official said.