S Korean government urges banks to ensure liquidity

SEOUL, Oct. 7 (Xinhua) -- South Korean government urged local banks to take active measures to stem any shortfalls in liquidity, including sales of their foreign currency-denominated assets, the Korea Herald reported Tuesday.

"The currency authorities will help out, as promised, injecting liquidity from foreign reserves, but banks must do their part too," Finance Minister Kang Man-soo said Monday at the meeting with the CEO of local banks.

"We urge bank presidents to sell overseas assets, such as foreign currency-denominated securities," he said.

The remarks came as the country faces spiraling lending rates and the scarcity of loans available to small- and medium-sized enterprises (SMEs) due to the global credit crunch.

In order to stabilize the market the South Korean government plans to inject 5 billion U.S. dollars into local financial system which will be funded to the SMEs struggling with temporary dollar shortages.

The government also plans to provide at least 4.3 trillion won (3.4 billion U.S. dollars) in extra loans and other financing tools to support small firms facing troubles due to the rising costs and losses related to currency movements.

Furthermore, in order to prevent sharp falls in the value of the local currency, the government is to provide 10 billion U.S. dollars into the won-dollar swap market.