Banks’ short-term overseas borrowing on the rise

Korean banks’ short-term overseas borrowing climbed in December as lenders rushed to secure foreign currency liquidity amid concerns over a deterioration in external conditions, the financial watchdog said yesterday.

A total of 16 local banks refinanced 120.3 percent of their maturing short-term foreign debts through fresh borrowing last month, compared with 95.9 percent in November, 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 indicates that local lenders have acquired more fresh foreign loans rather than refinancing their maturing foreign debts.

The refinancing rate of 12 local banks’ mid and long-term foreign debts stood at 174.4 percent, slipping from 179 percent a month ago, the FSS said.

The December figure marked the seventh straight month that lenders acquired fresh foreign debts, it added.

“Local banks expanded their foreign borrowing as part of preemptive efforts to brace for a worsening of external circumstances,” the FSS said.

Market uncertainties stemming from the euro zone debt crisis and slowing economic growth is expected to linger this year amid sovereign credit downgrades and a lump of euro zone government debt maturities.