Local banks` foreign currency liquidity conditions improve

SEOUL, May 6 (Yonhap) -- South Korean banks' foreign currency liquidity
conditions improved this year due to the government's dollar supply and the
country's rising trade surplus, the country's financial watchdog said Wednesday.
The foreign currency liquidity ratio of 18 local commercial and state banks came
in at 106 percent as of the end of February, up 7.1 percentage points from the
end of last year, according to the Financial Supervisory Service (FSS).
The ratio measures the percentage of a bank's foreign currency assets maturing
three months or less to its foreign currency debts with the same maturity.
The ratio hovered above 101.7 percent, the level seen before the collapse of U.S.
investment bank Lehman Brothers Holdings Inc. in mid-September, it added. The
watchdog advises local bank to keep the ratio above 85 percent.
"Local banks' foreign currency liquidity situations sharply improved as the
government pumped dollar liquidity into the market and the country posted a large
trade surplus, alleviating the concerns of foreign investors over local banks,"
the FSS said in a statement.
Korean banks, saddled with high overseas short-term borrowing, had been suffering
from dollar shortages sparked by the failure of Lehman. Squeezed dollar liquidity
conditions prompted the local currency to tumble 25.7 percent to the U.S. dollar
last year alone.
But the country's currency market has stabilized noticeably since March as local
banks have been making efforts to borrow overseas and the country's trade surplus
is improving.
In April, South Korea posted a record trade surplus of US$6 billion in April as
imports shrank faster than exports.
sooyeon@yna.co.kr
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