South Korea's state-run debt restructuring agency said on Wednesday that it made a purchase deal on local savings banks' bad assets worth 1.24 trillion won (US$875 million).

With the current purchase deal, the Korea Asset Management Corp. (KAMCO) has thus far bought 1.74 trillion won, or US$1.23 billion, worth of property-related loans from local mutual savings banks, the agency said.

It also plans to buy out bad assets from commercial lenders, which have been suffering from a surge in bad loans amid a severe economic slump.

The South Korean government is set to launch a restructuring fund worth 40 trillion won (US$28.2 billion) to clear out bad assets from local financial companies.