Moody's rates Industrial Bank of Korea

Moody's Investors Service said it has assigned a Baa1 rating to the Industrial Bank of Korea's proposed $300 million lower tier II subordinated notes due 2014.

The outlook is negative in line with the outlook on the Korean sovereign ratings.

Moody's said the rating is underpinned by the bank's role as one of Korea's three policy banks and provider of financing to small and medium enterprises in the country. Industrial Bank of Korea is the primary vehicle of specialized small and medium enterprises funding in Korea, particularly to small-scale enterprises which are traditionally under-served by commercial banks.

The rating also takes into consideration the government of Korea's legal obligation to replenish any deficit that may arise if reserves are insufficient to cover annual net losses, as stipulated under the Industrial Bank of Korea Act. This support feature serves to mitigate potential negative consequences from its policy function, which contributes to its weaker-than-average financial fundamentals.

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