Eximbank’s capital increase to pave way for Polish arms export

The National Assembly passed the bill to revise the Export-Import Bank of Korea Act on Thursday, raising the state lender's capital limit from the current 15 trillion won to 25 trillion won. (Newsis)

The National Assembly passed the revision bill to raise the Export-Import Bank of Korea's capital limit from the current 15 trillion won to 25 trillion won ($12.24 billion to $15 billion) on Thursday, giving the policy lender some extra room to level up its financing for the arms export deal to Poland.

The revision of the Export-Import Bank of Korea Act was passed as a total of 209 lawmakers voted in favor of the bill, while 29 voted against it. There were 34 abstentions.

Under the revision, Eximbank will have some room to further finance local defense companies’ 30 trillion won export deal to Poland.

“The revision of the Export-Import Bank of Korea Act has proceeded through the discussion on the need to expand the legal limit on Eximbank’s capital based on the proposals from both rival parties,” the Finance Ministry said in a press release.

“The revision will be enacted on the date of its announcement. The government will push for the capital contribution to happen at the earliest possible,” the statement read.

Under the previous law, the maximum amount of the state bank's financial support to a borrower could not exceed 40 percent of its equity capital. The policy lender’s capital limit stood at 15 trillion won, as mandated by the related law that was last revised in 2014. Its financing limit to Poland already neared its cap as it had lent out 6 trillion won to the country in the previous deal.

But through Thursday’s revision, the equity capital has been raised to 25 trillion won, giving room for an additional 4 trillion won financing. It is yet to reach Poland’s requested amount of 20 trillion won, but industry officials view this will give an upper edge in working out the deal.

With the 21st National Assembly set to end soon as the general election slated for April nears, Thursday’s meeting was assessed to be the last opportunity to pass the revision. If the bill had not been passed, the revision procedure would have to start from scratch in the 22nd Assembly, jeopardizing the deal with Poland.

The Eximbank’s paid-in capital stood at 14.77 trillion won as of the end of last year. With the capital increase, the run-out rate will fall under 60 percent, giving it further room for policy financing.

By Im Eun-byel(silverstar@heraldcorp.com)