BOK offers US$3 bln in loans to local banks

SEOUL, March 17 (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, by tapping its currency swap line with the U.S. Federal
Reserve.

The Bank of Korea (BOK) said the money is part of a $30 billion currency swap
agreement which it signed with the Fed in late October.
The total amount of the swap line tapped by the BOK declined to $16 billion from
$16.35 billion as local banks repaid $3.35 billion in loans, which the BOK
previously extended on Dec. 12, and then, the central bank put in a bid for $3
billion earlier in the day.
According to the central bank, 12 financial institutions participated in the
auction, bidding for $4.2 billion on offer. The loans have an average annual
interest rate of 1.29 percent and will mature in 84 days.
"Given that local banks bid for smaller amounts on offer compared to two weeks
earlier, dollar liquidity conditions seemed to improve," an official at the BOK
said.
Last week, the BOK did not hold an auction for its weekly dollar injection as
local banks are making their own efforts to borrow from overseas and the
country's trade balance is improving.
Hit by the collapse of Lehman Brothers Holdings Inc., local banks have been
suffering from dollar shortages, sparking concerns they may have difficulty in
meeting financing needs and servicing their debt.
Since October, the BOK has provided foreign currency liquidity to cash-strapped
banks by tapping foreign exchange reserves of its currency swap line with the
Feb.
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 reserves totaled $201.54 billion at the end of February, the
sixth-largest in the world.
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
(END)