Seoul - In a move to support its banking system, the South Korean government plans to provide funds from a planned 20-trillion-won (13-billion-dollar) recapitalization fund in March, an official statement said Wednesday.

The fund aims at shoring up ailing banks and kick-starting loans to medium-sized companies, the Financial Services Commission said, adding that a first tranche of 12 trillion won would be used to acquire preferred shares and subordinated debt.

Banks can request assistance until the end of this week. The South Korean central bank is to inject 10 trillion won into the fund, while the state-owned Korea Development Bank is to pump 2 trillion won into the fund. The remainder will be shared by investors and other banks.

The fund is aimed at strengthening the economy and speeding up restructuring measures, Kim Kwang Soo, head of the FSC's financial services department, was quoted as saying by the official Yonhap news agency.

South Korea's economy is heading towards a recession for the first time since the Asian financial crisis in the late 1990s. The gross domestic product of Asia's fourth-largest economy contracted by 5.6 per cent in the last quarter of 2008 compared with the previous quarter. The GDP shrank by 3.4 per cent year-on-year. (dpa)