Banks to face tougher foreign currency liquidity rules

SEOUL, Nov. 19 (Yonhap) -- South Korea's financial watchdog said Thursday it will
require local banks to hold safer foreign assets from next year in an effort to
prevent a possible liquidity crunch.

Korean banks, saddled with high short-term borrowing, suffered from a severe
liquidity squeeze last year as they were hit by the U.S.-sparked global financial
crisis, fueling concerns they may face difficulty in servicing their debt.
Starting July 2010, investment vehicles with credit ratings of "A" and above,
such as U.S. Treasuries, will be required to account for more than 2 percent of
banks' foreign currency assets, the Financial Services Commission (FSC) said.
The watchdog said it could raise the ratio down the road, depending on banks'
foreign currency liquidity conditions.
"The move aims at boosting local banks' foreign currency liquidity and beefing up
their risk management," Choo Kyung-ho, director-general of the financial policy
bureau of the FSC, said in a press briefing.
sooyeon@yna.co.kr
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