Korea Federation of Banks (KFB), the non proft organisation working for the development of Korean financial industry, has announced that six South Korean banks have entered into a preliminary agreement to form a ‘bad bank’ on September 30. The move is intended to absorb toxic loans of worth KRW4 trillion from the financial firms’ books – reported Wall Street Journal.
According to a statement by KFB, the National Agricultural Cooperative Federation and the bank unit of Woori Finance Holdings, will own 15% each in the entity. Industrial Bank of Korea and the bank units of KB Financial Group, Shinhan Financial Group and Hana Financial Group, will each hold 17.5% each, reported the Daily Mail.
After the launch of the bank, the entity will be open to outside investors to buy stakes held by participating banks, the federation added. KFB has also said that the so called ‘bad bank’ will have a capital of KRW1.5 trillion and work till 2014.
It has been reported earlier that as part of efforts to eancourage healthy asset management practices, KFB had set a non performing ratio target of 1% for local banks in South Korea by the end of this year. However, they had a bad loan ratio of 1.5% by the end of June.
