Gov't extends overseas borrowing guarantee by 6 months

SEOUL, April 7 (Yonhap) -- The government said Tuesday it will extend by sixth months its guarantee on overseas borrowing for local banks to help them secure more liquidity in the face of tight credit conditions.

According to the Ministry of Strategy and Finance, the government approved a bill
during a Cabinet meeting earlier in the day to extend the guarantee until the end
of this year.
In October, the ministry announced that it would 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 a dollar shortage and shore up market
confidence, which had been pummeled by the global financial turmoil.
The ministry said that it will also extend the duration of state guarantees from
the current three years to five, a move aimed at bolstering longer-term borrowing
in overseas markets.
"We had been considered extending the guarantee by one year but gave up the
option for fear of giving an impression that we are in a worse economic condition
than other nations, most of which provide the guarantees until the end of this
year," a ministry official said.
Britain offers state guarantees on banks' foreign borrowing until the end of this
year, while the United States and Canada offer guarantees until October and
December, respectively, according to the ministry.
The move, subject to parliamentary approval, comes as local banks are struggling
to borrow dollars from foreign lenders. Banks have become wary of giving loans
amid the financial crisis, which was tipped off in mid-September.
Concerns over a dollar shortage have prompted the local currency to tumble in
recent months, causing some market observers to worry that the nation could face
a repeat of the liquidity crisis it suffered a decade ago.