Lenders snap up foreign currency as safeguard

Korean banks’ mid and long-term foreign borrowing sharply increased in October as lenders rushed to secure foreign currency to shore up their positions in the face of global financial woes, the financial watchdog said yesterday.

A total of 12 local banks refinanced 299.3 percent of their maturing mid and long-term foreign debt through fresh borrowing last month, up from 186.6 percent in September, according to the Financial Supervisory Service.

The rollover rate gauges the percentage of fresh overseas borrowing against foreign debts that mature in one year or less. A refinancing rate of more than 100 percent means local lenders acquired more fresh foreign debts than refinanced their maturing foreign debts.

Local lenders have been securing mid and long-term funds for the fifth straight month, according to the FSS.

The refinancing rate of maturing short-term foreign debt by 16 local banks reached 108 percent, compared with 136.4 percent in September, the watchdog said.

Meanwhile, the FSS said that conditions for foreign borrowing slightly improved amid euro zone policy efforts and expanded foreign currency swap lines with China and Japan.

In October, Korea agreed with China to double the existing won-yuan swap to 360 billion yuan ($57 billion). In the same month, Seoul struck a deal with Tokyo to hike their currency swap line to $70 billion from $13 billion.

The spread on short-term foreign borrowing fell 4.4 basis points on-month to 33.5 basis points. A basis point is 0.01 percentage points.

The watchdog, however, said the spread on mid and long-term foreign loans trended higher amid lingering worries over market uncertainties.

The spread on mid and long-term foreign borrowing that matures in five years gained 18 basis points to 163 basis points, according to the FSS.

Yonhap