Korean Banks exhibit foreign exchange liquidity

Ample foreign currency liquidity of South Korean banks helped reduce the need for fresh loans in September, the financial regulator said Sunday.

A total of 12 local banks refinanced 97.8 percent of their long-term maturing debt with fresh foreign borrowing last last month, sharply down from 437 percent in August, according to the Financial Supervisory Service.

The corresponding refinancing rate for 16 Korean banks' short-term debt reached 91 percent in September up from 81.2 percent the previous month.

The FSS said lenders have surplus funds to repay maturing foreign debts largely due to robust borrowing in previous months.

It cited favorable borrowing conditions for Korea's foreign currency-denominated bonds after its back-to-back sovereign rating upgrades by global credit appraisers, and a series of economic stimulus measures in the United States and Europe.

Given the positive borrowing conditions, the FSS noted South Korean banks will not likely be affected by the end of the currency swap extension deal with Japan. On Tuesday, Seoul decided to let the US$70 billion swap contract with Tokyo expire by the end of this month as its capacity to deal with external risks has improved.

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