Bankers Trust Corp. has come to the aid of a troubled South Korean bank.
The U.S. banking company has been retained by Seoul Bank to provide asset-backed securitization and to help manage the South Korean bank's overseas business and services.
In addition, Bankers Trust will also do risk management and credit analysis.
"Through this first strategic business collaboration in Korea, Seoul Bank expects to accelerate its business normalization," Bankers Trust said in a statement.
It added that the agreement will "enable Seoul Bank to restructure its portfolio, including nonperforming assets secured by domestic real estate."
The two companies may also take a small equity stake in each other, Bankers Trust said in release.
Seoul Bank ranked as its country's largest at yearend 1996, with $24 billion of assets.
Bankers Trust executives could not be reached for comment on the agreement, which was signed last month in Seoul by George Vojta, vice chairman of the U.S. company, and Bok-Youg Shin, chairman and president of Seoul Bank.
The latest agreement is similar to an arrangement made between Bankers Trust and Nippon Credit Bank last year. Nippon Credit also suffered from a high level of nonperforming loans.
South Korea's currency and stock market went into a nosedive last year after several years of high borrowing from foreign banks and precipitated a financial crisis among South Korean banks.
According to South Korea's central bank, the country's 26 banks had $13.5 billion in nonperforming loans, or nearly 6% of all loans. However, some international auditing firms have estimated that up to 30% of all loans on the books of South Korean banks may be nonperforming if U.S. regulatory practices were applied.
To help overcome the crisis, the International Monetary Fund last year gave South Korea $58.5 billion in financing on the condition that the country adopt economic reforms. In March major foreign creditor banks of South Korea also agreed to extend the maturities on about $25 billion in short-term loans from less than one year to two years or more.
Under conditions imposed by the IMF, 14 of South Korea's banks lacking minimum international 8% capital-to-asset ratios must submit a plan to recapitalize by June. The banks will be given up to two years more to restructure their balance sheets.
The IMF conditions have prompted speculation that some South Korean banks, including First Korea Bank and Seoul Bank, might be taken over by U.S. or other foreign banks or that foreign banks might take sizable equity positions in local financial institutions. Major U.S. banks have denied having any plans to buy South Korean banks, but Germany's Commerzbank has confirmed that it might take a stake in Korea Exchange Bank.