South Korea planning bond fund
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Banks and insurance companies are likely to take part in the bond fund.
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SEOUL, South Korea (Reuters) -- South Korean financial companies will set up a five trillion won ($3.98 billion) fund to buy bonds off investment trusts threatened by a possible credit crunch, a government source said on Wednesday.
The plan to buy bonds issued by credit card companies is part of measures the government is expected to announce on Thursday to help ease troubles at investment trust companies, the source at the Financial Supervisory Commission told Reuters.
"The measures will aim to help them cover redemption calls and the plan (to set up a fund) is to provide them with quick funds," said the source, who declined to be named.
Investors cashed in more than 20 trillion won of bond funds after a corporate accounting scandal was uncovered in early March, but investment trust firms had difficulty securing cash to meet the redemptions because there were few buyers of low-profile credit card debts. That has raised worries they face a credit crunch.
Investment trust companies hold more than 25.5 trillion won of bonds and commercial papers issued by credit card companies, data from the commission showed.
"The size of the fund has not been finalized but it will be about half of the 10 trillion won worth of (credit card) debts that come to maturity in June," the source said.
The source said banks, insurance companies and other financial institutions would participate in the planned fund, but did not elaborate.
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