Gov't may extend guarantee for banks' overseas borrowing: officials

SEOUL, March 27 (Yonhap) -- The South Korean government is pushing to extend its
guarantee for overseas borrowings by local banks as part of efforts to help them
secure more liquidity in the face of toughened credit conditions, officials said
Friday.

According to officials from the Ministry of Strategy and Finance and other
financial policymaking agencies, the government is seeking to extend the bank
guarantee by one year until June of 2010.
In October, the ministry announced that it will provide as much as US$100 billion
worth of state guarantees on banks' foreign debts until June 30 this year. The
move was intended to ease the dollar shortage for banks and shore up market
confidence pummeled by the global financial turmoil.
"We plan to submit a bill to the National Assembly next month to extend the
guarantee which is to expire in June," an official said on condition of
anonymity. "Initially, we pursued extending it until the end of this year but
currently a one-year extension will be more likely to be submitted."
The move comes as local banks are struggling to borrow dollars from overseas amid
frozen credit conditions in the wake of the global financial turbulence that
started in mid-September.
So far this year, 18 local banks raised a combined $5.5 billion of debts with
maturity of one year or longer. Of the total, $4.5 billion were from state-run
banks including Korea Development Bank. Government officials expect that the
extension will make it easier for local banks to borrow foreign debts.
Concerns over a dollar shortage prompted the local currency to tumble in recent
months, causing some market observers to worry that the nation could face the
repeat of a liquidity crisis that it suffered a decade ago.
kokobj@yna.co.kr
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