The State Guarantee of External Debt of Korean Banks (South Korea GFC)

17 Pages Posted: 27 Oct 2020 Last revised: 27 Aug 2021

See all articles by Lily Engbith

Lily Engbith

Yale School of Management - Program on Financial Stability

Date Written: October 10, 2020

Abstract

Following the Lehman Brothers bankruptcy of September 15, 2008, a number of foreign governments enacted stabilization measures in order to bolster their currencies and inject much-needed liquidity into domestic markets. As part of its effort, the Korean Ministry of Strategy and Finance announced a series of government interventions that included a three-year guarantee of foreign debt issued (including extensions of maturity) by domestic banks between October 20, 2008, and June 30, 2009. This opt-in program was introduced as a preemptive step in ensuring that Korean financial institutions would retain competitive access to external funding in the wake of the global credit crunch. Though the guarantee cap was set at $100 billion, maximum utilization totaled only $1.3 billion issued by a single participant (Hana Bank). On June 30, 2012, the guarantee scheme was terminated with the repayment of all obligations by Hana Bank.

Keywords: Korea, foreign debt, government guarantee

JEL Classification: G01,G28

Suggested Citation

Engbith, Lily, The State Guarantee of External Debt of Korean Banks (South Korea GFC) (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 793-808. , Available at SSRN: https://ssrn.com/abstract=3718069

Lily Engbith (Contact Author)

Yale School of Management - Program on Financial Stability ( email )

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P.O. Box 208200
New Haven, CT 06520-8200
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