South Korea's credit rating was downgraded to junk-bond status yesterday by the New York-based credit rating firm Standard and Poor's. The agency said it lowered the long-term foreign currency rating of the Republic of Korea and related entities to single-`B'-plus from triple-`B'-minus and its local currency rating to triple-`B'-minus from single-`A'-minus.

In addition, the agency lowered its short-term foreign currency rating `C' from `A-3' and its local currency rating to `A-3' from `A-2.'

S and P said it took the action because "recent steps taken by the government to assist its banking sector place the sovereign's own external position at risk and are inconsistent with the spirit of the IMF programme."

"The (Seoul) government's negotiations to intermediate external borrowings on behalf of its banks, or to guarantee them, will not likely succeed in restoring international confidence in the sector."