BOK offers US$3 bln in loans to local banks

SEOUL, March 3 (Yonhap) -- South Korea's central bank said Tuesday it provided
US$3 billion in loans to local banks, which have been suffering from a dollar
liquidity crunch in the wake of the U.S.-sparked global financial turmoil.
The Bank of Korea (BOK) said the money is part of a $30 billion currency swap
agreement which it signed with the U.S. Federal Reserve in late October. The
total amount of the swap line tapped by the BOK held steady at $16.35 billion as
local banks repaid $3 billion in loans, which the BOK previously extended on Dec.
9.
According to the central bank, 14 financial institutions participated in the
auction, bidding for $4.5 billion on offer. The loans have an average annual
interest rate of 1.32 percent and will mature in 84 days.
"Local banks tapped dollar loans by the central bank as they are still facing
difficulties in raising foreign currency funds," said an official at the BOK
said.
Market jitters deepened amid concerns that local banks may not be able to pay
back their debt due to a dollar shortage. In recent sessions, the local currency
market has been gripped by fears that a capital flight by Japanese financial
firms may trigger a financial crisis in March.
The country's foreign exchange reserves declined in February for the first time
in three months, but managed to stay above the psychologically important $200
billion mark.
The foreign reserves declined for the eighth straight month before rebounding in
December as authorities unloaded part of their dollar holdings to stem the Korean
won's fall and to ease the deepening credit squeeze. The country's foreign
reserves, the world's sixth-largest, totaled $201.54 billion as of the end of
February.
South Korea also reached new currency swap arrangements with China and Japan in
mid-December, expanding its existing swap lines with the two countries to $30
billion each.
sooyeon@yna.co.kr
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