S.Korea KDB, others to provide $8 bln to lenders

SEOUL Dec 30 (Reuters) - South Korea's state-run financial institutions plan to provide a combined 10.2 trillion won ($7.93 billion) next year to help local lenders boost their financial bases and shed bad debt, the financial regulator said on Tuesday.

The planned amount represents a 89 percent increase from the 5.4 trillion won to be spent for similar purposes this year, as South Korea tries to beef up support for the financial sector amid the global downturn, the Financial Services Commission (FSC) said.

Under the plan, Korea Development Bank (KDB) will contribute a total of 3 trillion won in 2009 to a local bond fund and a separate fund to recapitalise domestic banks, according to the FSC.

State debt clearer Korea Asset Management Corp (KAMCO) will also spend 2.6 trillion won to buy bad debt while Korea Housing Finance Corp will provide 4.6 trillion won by selling mortgage-backed securities based on mortgage loans purchased from financial firms.

South Korea's banks are rushing to raise new capital on the prospect of rising bad debt and dwindling profits.

State-controlled lenders such as KDB and Industrial Bank of Korea (024110.KS) are also expected to boost funding to downturn-hit companies and households next year. ($1=1285.7 Won) (Reporting by Rhee So-eui; Editing by Jonathan Hopfner)