That's why the government has been working so hard on fixing merchant banks, investment trusts, so it can ease the liquidity situation. Resistance in the ranks Getting the CBOs off the ground has proved a hard battle. So far, the authorities have collected only W3 trillion of the proposed W10 trillion bond fund. They say the present scheme is unsupportable, mainly due to the pricing of the CBOs, say analysts. That means when interest rates rise, the banks would automatically face capital losses.
Bankers are also concerned that a partial guarantee is inadequate.
They also take issue with the make-up of the fund. The formula is based on net growth in deposits and the strength of a bank's balance sheet. That means most of the funds will come from Korea's healthiest commercial banks. No surprise then that the banks are dragging their feet. To the barricades The banks have become increasingly intransigent of late.