Banks' foreign currency liquidity improves in June

SEOUL, July 12 (Yonhap) -- South Korean banks' short-term foreign currency
liquidity improved last month as local banks increased overseas borrowing to
brace for a potential global liquidity crunch, the financial watchdog said
Monday.
A total of 16 local banks refinanced 137.7 percent of their maturing foreign debt
through fresh borrowing in June, compared with 121.4 percent seen the previous
month, according to the Financial Supervisory Service (FSS).
A bank's short-term refinancing rate measures the percentage of its new borrowing
against foreign currency debts, which have a maturity of one year or less.
The refinancing rate stayed higher mainly because some local lenders borrowed
from overseas in a bid to prepare for a possible global liquidity squeeze despite
rising borrowing costs, the FSS noted. Borrowing costs heightened amid lingering
concerns about Europe's debt crisis and the flagging global economy.
Meanwhile, their long-term overseas borrowing sharply increased last month mainly
because a state trade bank sold overseas bonds worth $1.25 billion.
A total of 12 Korean banks drew US$2.81 billion by borrowing from foreign banks
and issuing bonds in June, up from $520 million the previous month, according to
the watchdog.
Amid eurozone debt fears, the costs of insuring South Korean bonds against
defaults, or premiums on credit default swaps, reached 133 basis points last
month, unchanged from the previous month, the FSS noted. A basis point is 0.01
percentage point.
sooyeon@yna.co.kr
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